Running Head: FINANCIAL STATEMENTS aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa a aa aa aa aa aa aa
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Notes to Financial Statements
ACC309
Southern New Hampshire University
FINANCIAL STATEMENTS aa aa aa aa aa aa aa aa aa aa aa aa a aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa a aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa
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Peyton Approved’s financial statements were constructed on the basis of the
particular 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. aa
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
FINANCIAL STATEMENTS aa aa aa aa aa aa aa aa aa aa aa aa a aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa a aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa aa
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higher as compared to the estimated numbers. For instance, in actuality, the net income of
the firm is somewhat 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.
