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ACC 201 Module 7 Project Summary Report
Financial Accounting (Southern New Hampshire University)
Summary Report: Financial Statements
Introduction
The purpose of this summary report is to track and also record the businesses first month of
operation using documents and transactions provided by the owner. Using accounting standards,
I reported tran1Ysactions through journal entries and accounting ledgers in the attached
workbook. A trial balance was also created to verify that the costs and revenues were reported
and adjusted correctly. An income statement, statement of stockholder equity and balance sheet
were also generated to track the company’s first month of business.
Financial Statement Analysis
When looking at the financial statements, the new business made a profit of $3,224.17 according
to the income statement. The income statement recorded the revenues for the month and
subtracted the expenses involved for the month of March. This gave the company a profit for
their first month. It is important to note that the balance sheet shows more detail as to the
process for the profit. This information shows more in detail the different assets of the company
as well as the liabilities that needed to be paid for the month. This again, shows that the
company performed positive for their first month in business.
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Internal Controls
Internal controls in a business are very important for a business to be successful. Internal
controls are a safeguard for business to ensure that their information is correct financially and it
also keeps employees and managers compliant with laws and regulations (Cengage, nd). Internal
controls not only help to prevent fraud, but they also establish a process for how your business
handles receiving and reporting money and administrative and management tasks (Brookins,
Summary Report: Financial Statements 2019). A suggestion for an internal control procedure I
would start is to have more than one person order, receive and pay vendors. Having one person
do this job could cause intentional and unintentional errors. Having a second person either take
over a step or oversee all the steps in the ordering process, then any errors can be caught and
fixed immediately. Although it is cost effective to only have one employee handle this, it is
better for the companies’ internal controls to have more than one employee.
Looking to the Future
In response to the owner’s request for additional information and support for future growth,
there are different accounting methods that can be used to value their inventory, including FIFO,
LIFO, and weighted average. Using FIFO, the cost of the oldest inventory is used to calculate the
cost of goods sold. In LIFO, the cost of the most recently received inventory is used to calculate
the cost of goods sold. In the weighted average method, the overall cost of the inventory is
calculated. For this particular business, I would suggest the weighted average method because
they are a new company and have a lot of inventory which could skew the numbers to show
inaccurate information.
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Since this business is new, they need to maintain accurate financial documents to ensure that the
business will grow in the future. By using the different accounting techniques and statements in
the workbook, they can quickly identify whether their month is profitable or not. They can
easily see where they need to correct or adjust to create a better finanancial stance in the
industry. They also need to put internal controls in place that will be followed to protect their
assets and profits. Internal controls are important in keeping the company protected from any
intentional and unintentional use of company equipment and/or inventory.
