Running Head: FINANCIAL STATEMENTS o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o 1
Notes to Financial Statements
ACC309
Southern New Hampshire University
FINANCIAL STATEMENTS o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o 2
Peyton Approved’s financial statements were constructed based on the accounting
method that was ascertained would be viable and relevant for the business entity. The company
has witnessed substantial growth in recent years. However, the preliminary profit and loss
account (income statement) and balance sheet have revealed that this year’s performance might
be dissimilar. As per the preliminary balance sheet of Peyton Approved, the total asset is equal to
the total liabilities along with the company equity, which comes to USD 19,537,963. According
to the primary profit and loss account, the company has a significant amount of gross profit worth
USD 22,962.051. On the other hand, the operating expenses of the firm is $ 6,288,160. It implies
that it is merely 27 percent of its entire gross profit of the firm. Even after adjusting the income
tax, the company’s net profit is high at USD 12,505,418. It comes to around 54 % of the
company’s gross profits. As the accountant of Peyton Approved, I think the company has been
showcasing commendable financial performance since its net profit is more than half its gross
profit. As per the preliminary retained earnings statement of the firm, the closing figure of the
retained earnings is USD 9,418,541 and it is a positive sign. o
The position that was revealed in the preliminary balance sheet of the business got me
worried since the company only had ample assets for covering the liabilities as well as equity.
But it would have any additional funds in case any contingency occurred. However, the solid
financial position of Peyton Approved that was revealed by the profit and loss statement as well
as the statement of retained earnings eased the tension.
The revised balance sheet, profit, and loss account, as well as statement of retained
earnings have confirmed the information that was captured in the preliminary financial
statements of the company. Certain actual numbers in the firm’s financial statements are higher
as compared to the estimated numbers. For instance, the net income of the firm is somewhat
FINANCIAL STATEMENTS o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o 3
lower at USD 12,321,957, but the gross income is USD 12,586,957. The firm’s retained earnings
number is favourable than the estimated value since it stands at USD 9,500,080. The company’s
revised balance sheet has revealed that its total equity is USD 18,955,497 and it easily surpasses
the total liability worth USD 8,209,473. It is a good sign since it indicates that in case of any
contingency, Peyton Approved has ample funds to cover its financial losses or obligations. The
statement of earnings per share has revealed that the firm has robust earnings per share (EPS).
The firm’s basic earnings per share is USD 12.27. In case of the conversion of the preference
shares, the EPS is USD 1.96, and if the conversion of all corporate bonds are made, the EPS is
USD 3.96. It implies the firm is offering a decent return to its shareholders on their investment,
irrespective of the EPS computation. The accounting principles that are adopted are uniform with
that of the former period unless a statement to the contrary is presented.
