Accounting Summary Report

Week Two Written Assignment Directions and Advice

You must use Excel to produce a journal, income statement and balance sheet. The three- to four-page paper (not

including the title page) should focus on the interpretation of the accounting information. The printout of the Excel

spreadsheets (with appropriate formatting) used to compute the information should be attached as an appendix or inserted

into the text of the report. For readability, it is very important that your numbers be formatted to 2 decimal places with no

dollar signs. You are only required to show Season One in the Accounting Summary Report. If you do show the financial

reports for Seasons Two and Three, it is possible that you well need to redo them if errors are found in Season One.

Accounting Advice:

The Lemonade stand reports are critical thinking assignments. There is not a correct format. Look at a variety of

investment reports from stock research companies, the CEO statement in an annual report, or the auditor report for an

audit. They all contain statements that are based upon some fact and the writer’s interpretation of the fact. They are not

the same from company to company because the numbers that are interesting are often different.

In these reports, compute some facts whose formulas are in the book. Explain what those facts mean based upon the

definition from the formula. Some facts will look unusual (either good or bad). For the facts that are unusual, explain

why they are unusual in comparison to another season or company. Also, explain why the fact is unusual based upon how

they were computed (what accounting number is most likely accounting for the unusualness of the number and is that

good or bad).

The summary report has two goals. The first goal is to compute and produce the statements and ratios that are common in

any business? The lemonade stand is a simple example to generate data as found in the handout (you can use the game or

the handouts). If it helps, the outcome of the game isn’t important, but rather how you report it. The second goal is to

interpret and explain the number as discussed below.

A Second Attempt to Explain:

First take that data from playing the Lemonade Stand game yourself and generate a journal, as described in the text and in

the example. In the second step, you use the journal to produce an income statement and a balance sheet. The third step

is to produce a written report that gives the results in English as opposed to numbers. These are standards for all

businesses. The lemonade stand is a very simple example of what is common in any business.

What happens in the written report at the first level is just stating a number from the statement and telling what it is (use

the definition from the text). The second level of the report is explaining what the numbers from the statement tell you

about the health of the business. The third level is analyzing the numbers and making a recommendation about how the

business can be run better. This third level is looking at a number and asking how it can be better. Managers are always

doing this. For example, if profits are not good enough, then to make profits better will involve cutting expenses or

raising revenues (because profits equal revenues minus expenses).

Make sure to question any results that are not correct or do not appear to be correct. If assets do not balance with

liabilities plus equity you must track down the error. The most efficient method is to begin with the final statements and

work backwards. Question any amounts that appear to be unusually large or small. It is impossible to have a negative

figure for inventory, liabilities or any other balance sheet item.

If you can’t produce all three levels, you can still get a passing grade on the assignment by producing the first level. I

have never been to a meeting where a manager handed out financial statements where they did not talk about the numbers.

Even an annual report of a business, which contains the accounting statements, has a written English explanation of the

numbers. Do you need to write about every number? It may depend on whether you believe that every number is

significant or meaningful.

My advice is to start the process and use the “Questions about the Course” Forum, or email the instructor if you get stuck.

Lemonade Case Hints:

 Refer to the attached Sample Data Sheet.  The purpose of the game is to generate data – the email feature may work better if you download the

game and play from your desktop – it may require a flash player. However, you should be able to copy

and paste the data from the game.

 Consider the purchase of pictures and spoons as capital investments (long term assets). (It will be easier to assume they don’t depreciate – in real life they do). Consider purchase of mix, cups and ice as

inventory (short term assets). Keep in mind that the stand will close early if it runs out of any essential

item needed to make lemonade.

 Your income sheet should have Revenues (sales) and Expenses (Inventory used)  You must use the accrual method of accounting. All purchases are made on credit.  Expenses can be computed as: Starting inventory (cups, ice, and mix) + purchased inventory – ending

inventory.