Financial analysis and Balnce Sheet of Yumindi †Free Samples

Question: Discuss about the Financial analysis and Balnce Sheet of Yumindi. Answer: The objective of the assignment is to construct income statement and balance sheet of the entity and see where the new business stands does over the last three months. This would help Yamindi take a decision on whether to continue with the business or go for education. There are some challenges faced while constructing the income statement. The cost of the grooming machine was capitalized at one go which should not be the case. One should know on how long the machine will last and then depreciate the same over the years. This is one of the reasons why profit is down. The business even after such incomplete information is still profitable. As for Yumindi, the business should be continued, however a lot of information need to be properly assimilated so that one can do proper accounting for the business. Below you can find the income statement of the entity. The sales have been to the tune of $8220 of which some amount has been due to credit sales. Sales $ 8,220.00 Grooming Equipment Cost $ 5,000.00 Grooming Supplies $ 400.00 Electricity Bill $ 950.00 Advertising Cost $ 1,216.00 Net Profit $ 654.00 Additionally to this profit, Yamindi has withdrawn $1300 from the business for personal expense. In normal circumstances that $1300 should be considered as personnel expenses. However we have not considered the same as nature of business is not established and $3000 was bought by Yamindi as capital for the business. This can also be the case of capital reduction. There are expenses for which the bill has arrived but the payment has not been made. However such expenses need to be considered for the period as they have occurred within the nature of the business and are important in running the business. It is very important to look at financial statements in conjunction and then make a decision out of it. There is another situation where grooming machine was purchased for $5000, however only $4500 was paid for. Rest $500 need to be considered under Accounts payable and details of credit terms should be made available. The business is under viable financial situation as of now as lot of main costs has already been absorbed under the whole system. The profit would be very high if the cost of the machine is capitalized and then depreciated. The amount should be charged as depreciation and should not be the main part of income statement. As of now it is hitting the operating line of the financial system which is not correct. This is the reason why small bias exists in the current scheme of things. Financial statements can only be correctly represented when adequate information about the situation are made available. The reader of the financial statement should also look into the notes which make the whole information more cohesive and meaningful. The business decisions are based on financial information and hence having them in the right manner is very important.