maria hernandez
TRANSCRIPT
3/12/2012
Maria Hernandez & AssociatesBalance Sheets Through August 31,
2004Cash
Debit Credit 12,000 900
40,000 6,000
52,000
Balance 6,600
33,0005,5006,600
52,000
Notes PayableDebit Credit
0 20,00020,000
20,000 20,000
Balance 20,000
CapitalDebit Credit
0 30,00030,000
30,000 30,000
Balance 30,000
Equipment and SoftwareDebit Credit
27,00011,000 38,000
38,000
Balance 38,000
38,000
InventoryDebit Credit
5,000 1,700900 4,200
5,900
Balance 4,200
5,900
Accounts Receivable
Debit Credit
7,0007,000
7,000
Balance 7,000
7,000
Sales RevenueDebit Credit
47,0007,000
47,000
47,000 47,000
Balance 47,000
Prepaid Rent
Debit Credit
6,0006,000
6,000
Balance 6,000
6,000
Cost
Debit Credit
1,7001,700
1,700
Balance 1,700
1,700
Accounts Payable
Debit Credit
5,5005,500
5,500 5,500
Balance 7,000
Utility ExpensesDebit Credit
33,00033,000
33,000
Balance 33,000
33,000
Adjustments
Depreciation Expenses
Debit Credit
1,5001,500
1,500
Balance 1,500
1,500
Interest ExpensesDebit Credit
200200
200
Balance 200
200
Account Titles
Cash 6,600 6,600 6,600
Notes Payable 20,000 20,000 20,000
Equity 30,000 30,000 30,000
Equipment and Software
38,000 38,000 38,000
Prepaid Rent 6,000 6,000 6,000
Inventory 4,200 4,200 4,200
Accounts Receivable
7,000 7,000 7,000
Sales Revenue 47,000 47,000
47,000
Rent Expenses 6,000 6,000 6,000
Cost 1,700 1,700 1,700
Accounts Payable 5,500 5,500 5,500
Utility Expenses 33,000 33,000 33,000
Totals 102,500 102500
Depreciation Expense 1,500 1500 1,500
Accumulated Depreciation 1500 1500
Interest Expense 200 200 200 1500
Interest Payable 200 200 200Totals 1,700 200 104,200 104200 42,200 47,000 61,800 57200
Net Income 4,800 4,600
Totals 47,000 47,000 61,800 61800
Adjusted Trial Balance
Maria Hernandez & AssociatesWorksheet
Trial Balance Adjustments Income Statement Balance Sheet
For the Month Ending August 31, 2004
40,000-39,000
1,000
-6,400
00 0
-5,40012,000
6,600
Cash Flows from Financing Activities
Net Decrease in CashCash at the beginning of the periodCash at the end of the period
Purchase of Equipment
Cash receipts from revenuesCash Payments for expensesNet cash provided by operating activities
Drawings by ownerInvestments by owner
Maria HernandezCash Flow Statement
Through August 31, 2004
Cash Flows From Operating Activities
Cash Flows from Investing Activities
1.) Based upon these financial statements, it appears that the company, which is only in year one of operations, required a great deal of investment for start-up. Regardless of the increased investment amounts in order to compensate for new business needs, the company still managed to generate a $4,600 retained earnings from net income. Therefore, I would say despite the great reduction of the cash account of $45,400, income was still managed to be generated in the first month. The investment into the new business is required in order to grow the revenues. The expenses acquired during this period will not be seen again for some time.
2.) The company faces some risks as a result of this great decrease in the cash amount. There is only a $6,600 left in the cash account, which means that Maria may not be able to pay the required salary or any additional needs of the company over the course of the next month. There are some outstanding debts of $20,000 to her father with no interest being paid at the moment. There is also the risk of an additional $7,000 tied up in accounts receivable that will be important to collect in the future. In addition, another risk would be the possibility of actually borrowing money from the bank if Maria decided to expand her business. However, I would state that company is profitable and has potential to grow. Ms. Hernandez will need to address these risks and reduce the investment into the company in the following months and focus heavily on increasing revenues.