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Financial Statements - Nybrostrand Company Research

Other (Not Listed) Instructions:

Accounting is the language of business. It is important to have some understanding of accounting standards and the financial statements.

The term GAAP, or generally accepted accounting principles, refers to the standards promulgated by the Financial Accounting Standards Board (FASB). All US publicly held companies, and other companies audited by external auditors, must adhere to these standards.

The four financial statements required by US GAAP are:

  • The income statement
  • The balance sheet (or statement of financial position)
  • The statement of cash flow
  • The statement of retained earnings

The financial statements are based on the accounting equation, i.e.

Assets = Liabilities + Equity

Public companies must file a number of reports with the Securities and Exchange Commission (SEC), including quarterly and annual financial statements. These statements are typically released to the public and published on the corporate website. The annual report is traditionally associated with the release of financial information to the public.

The Profession

The American Institute of Certified Public Accountants (AICPA) states on its homepage (http://www(dot)aicpa(dot)org/Career/CareerPaths/Pages/CareerPaths.aspx) that the below specializations are available career paths to a licensed public accountant (CPA).

  • Forensic and Valuation Services Taxation
  • Fraud Prevention, Detection, and Investigation
  • Audit
  • Business and Industry/New Finance
  • Government
  • Personal Financial Planning
  • PrimePlus/ElderCare
  • Employee Benefit Plan Audit
  • Information Technology (IT)

For further information about the CPA profession and rules for licensing, go to the websites for AICPA or the National Association of State Boards of Accountancy (NASBA).

Required Materials

Accounting Concepts and Principles (2015) Pearson Learning  Solutions, New York

Accounting for McDonald’s  (2015) Pearson Learning  Solutions, New York

Accounting and the Business Environment (2015) Pearson Learning  Solutions, New York

Baruch College, The University of New York (2008). Guide to Financial Statements. This is a 45-minute interactive video presentation with audio. It is an excellent introduction and overview of financial statements. You do not have to watch the whole presentation at one time since it is easy to restart at different points. The information is also available in a PDF file.

Benedicto, M.S. (2008) Introduction to Financial Accounting. IE Business School. A multimedia presentation. The information is also available in a PDF file. Click on “Financial Statements" tab and "Practical Example" tab. Retrieved from http://openmultimedia(dot)ie(dot)edu/OpenProducts/financial_accounting/financial_accounting/frames.html

Other (Not Listed) Sample Content Preview:

Financial Statements- Nybrostrand Company
Name
Course
Trident University
Date
Income Statement
Nybrostrand CompanyIncome StatementFor the Year 12/31/2014Revenues$586,000 Cost of goods sold($307,000)Gross Profit$279,000 Operating Expenses Depreciation expense24,350 Insurance1,400 Marketing4,500 Rent28,000 Salaries78,500 Utilities6,700 Property taxes16,900160,350Net Income (Loss)$118,650 Retained earnings, beginning of year131,850Retained Earnings, end of year$250,500 
Revenues (Sales) - Cost of Goods Sold= Gross Profit
Gross Profit- Operating expenses- Properly expenses= Net Income/ profit
Beginning Retained Earnings + Net Income= Retained earnings, at end of year Balance Sheet
Nybrostrand CompanyBalance Sheet as of 31-Dec-14Cash and cash equivalents$30,000 Accounts receivable$36,500 Inventory34,000 Total Current Assets100,500Equipment (net of   depreciation)415,000 Total Assets515,500Accounts payable$78,000  Total Current liabilities$78,000 Long-term debt127,000 Total liabilities$205,000 Common stock10,000Paid-in capital50,000Retained earnings ( 131,850 + 118,650 )250,500 Total Stockholders' Equity310,500 Total Liabilities and Stockholders' Equity$515,500 
Assets = Liabilities + Equity
Comment on the success of Nybrostrand Company
The Goss margin is 47.61% ($279,000/$586,000), while the mark up is 90. 88%, which is $279,000/ $307,000. The income statement captures financial information on costs and revenues and financial details of the financial year, and not a specified point in time (Benedicto, 2008). Deducting the cost of goods (cost of sales) from the sales revenue represents the profitability levels (Baruch College, 2008). In the year ended December 2014, the costs and expenses were less than the revenues and the net operating income (profit) was $118,650. The net profits were then added to the beginning retained earnings to get the retaining earnings figure reflected in the balance sheet. Since the debit and credit balances in the trial balance must balance in the trial balance sheet, the retaining earnings figure is $ 131,850. There were no interest expenses despite Nybrostrand Company using long-term debt as a financing option. Even as the income statement was for one financial year, identifying the changes in costs, expenses and revenu...
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