ACC1AIS Accounting Information Systems:Anjit Gurung Company Analysis

Introduction

The main purpose of this report is to analyze the performance of the Anjit Gurung company for the month of May. There are various transactions which the company has engaged in for the month of May for which Journal entries are passed and income statement and a balance sheet has been prepared. The company is engaged in the business of buying and selling of socks. The business has prepared profit and loss account and a balance sheet for the month of May and also prepared a Trial Balance which are shown in the Appendix which is given below.

Financial Analysis

The transactions which are made during the year are recorded by passing necessary journal entries for the month of May. The transactions which are passed are the passed through various ledger accounts. In order to check the mathematical accuracy of the transactions of the business a trial balance is prepared (Karanina, Bykova and Ilysheva 2014).

As per the trial balance which is prepared by the company, the sales of the business is shown on the credit side of the trail balance and the same is shown to be $ 9,829. The expenses of the company comprise mainly of cost of good sold expenses which are directly related to the production of the products of the business and in addition to this, comprises of Motor Vehicle expenses which are incurred by the business during the month of May. The cost of good sold of the business is shown to be $ 5,932 and the motor vehicle expenses of the business is shown to be $ 531. The trail balance of the business shows that there is general level of accuracy in the transactions which are recorded by the business as the debit and credit side of the financial statements of the business matches and the total is shown to be $ 566,660.

The profit and loss account of the business which is prepared shows the profit which is generated by the business for the month of May. The profit and loss account of the business is prepared by considering the all the transactions which has taken place during the month (Reid and Myddelton 2017). The main objective of the profit and loss statement which is prepared by the management of the company is to display the profitability of the business for the month of May. As per the profit and loss account of the business, the main source of income for the business is the income which is generated from the sales of goods which has been manufactured by the business (Haas 2014). Another source of income for the business is interest income which is generated by the business due to the investments which are made by the business for the purpose of generating secondary income (Elrod, Murray and Bande 2013). The income which is generated from sales is shown to be $ 9829 for the month of May and the interest income which is generated by the business for the month of May is shown to be $ 706. The expenses which are incurred by the business for the month of May is shown in the pie chart which is shown below:

Figure 1: (Pie Chart Showing Expenses of the Company for the Month of May)

Source: (Created by Author)

As per the above chart which is shown above shows the operating expenses of the business during the month of May. The major part of the operating expenses of the business for the month of May is shown to be $ 4545. Rent is considered to be a part of the fixed expenses which the business has to incur irrespective of the fact that the business undertakes production of goods. Another major expense of the business is related to the interest which the business has to [pay which is related to the loan which is undertaken by the business for the month of May. The same has been shown as $ 2,042. This interest expense of the business is related to the servicing of the loan which the business has which is shown in the Balance sheet of the company (Robinson et al. 2015). The other expenses which are shown in the profit and loss account of the business are Depreciation and Motor Vehicle expenses. The depreciation expenses arise due to the wear and tear of the assets which are used by the business which results in reduction in the value of the assets. The depreciation expense of the business is shown to be $ 306. The motor vehicle expense of the business is shown to be $ 531. The financial statements of the company show that the business has incurred loss of $ 2,822 during the month. The main reason for such a loss is because of the increased amount of expenses which the business has incurred during the month especially the operating expenses of the business.

The main purpose of preparing the Balance sheet of the company is show the financial position of the business for the month of May. The balance sheet will be portraying all the liabilities and assets of the business for the month of May (Bobryshev et al. 2014). The current assets of the business are shown in the graph which is presented below:

Figure 2: (Chart Showing Current Assets of the Company for the Month of May)

Source: (Created by Author)

The current assets of the business comprise of Inventory, accounts receivables, interest receivables, offices supplies, prepaid advertisement and Prepaid Rent (Kapan and Minoiu 2013). The prepaid rent and prepaid advertisement forms the major part of the current assets of the business which is both shown as $ 22,727.27. The inventory of the business as shown in the graph above is shown to be $ 12,468.10 for the month of May which represent the closing stock of the business. The total of the assets side is shown to be $ 546,344.85. The fixed assets of the business comprise of Motor Vehicles and Office furniture. The total equity of the business is shown to be $ 200,000 which represents the owner’s capital less the amount of loss which is incurred by the business during the month.

References

Bobryshev, A.N., Uryadova, T.N., Lyubenkova, E.P., Yakovenko, V.S. and Alekseeva, O.A., 2014. Analytical and management approaches to modeling of the accounting balance sheet. Life Science Journal, 11(8), pp.502-506.

Elrod, C., Murray, S. and Bande, S., 2013. A review of performance metrics for supply chain management. Engineering Management Journal, 25(3), pp.39-50.

Haas, J.J., 2014. Corporate Finance. West Academic.

Kapan, M.T. and Minoiu, C., 2013. Balance sheet strength and bank lending during the global financial crisis (No. 13-102). International Monetary Fund.

Karanina, E., Bykova, I. and Ilysheva, N., 2014. Management Accounting System and the Balanced Scorecard: ReflectingEnterprise Risks. American Journal of Scientific and Educational Research, (1), p.112.

Reid, W. and Myddelton, D.R., 2017. The meaning of company accounts. Routledge.

Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015. International financial statement analysis. John Wiley & Sons.