The Diamond Gem Cleaning and Maintenance Service Company is a cleaning and maintenance company who primarily services commercial buildings. It has $5,146,862 in annual sales and with contract costs of $4,532,519. They have a gross profit of $614,333. Since gross profit equals revenue minus costs, the contract costs can be found by subtracting gross profit from revenue: $5,146,862-$614,333=$4,532,519.
The contract costs are the direct costs associated to with the cleaning service. They include such items as cleaning chemicals and wages to the cleaning employees. The contract cost is an important number because it allows you to figure out your profit. Without knowing your costs, it will be impossible to know if your company is making a profit …show more content…
Total current assets is made up of all items that can be easily converted to cash. Also know as a liquid assets. Contracts receivable is the amount the company is owed for previous work completed. Since we know that total current assets is made up of all current assets, we can subtract the sum of all other current assets from total current assets to get contracts receivables: $893,868-$388,818=$505,050.
Monitoring contracts receivables is very important because it affects the company 's cash flow. Diamond Gem will need cash flow for various activities. When payment is not received for services completed, that amount goes to contracts receivables. The money used to complete those services are tied up until the accounts are paid. Customers taking too long to pay for their services could have a negative effect on cash flow. Contracts receivables is seen as very similar to cash on the balance sheet. However, it is important to remember that some accounts may become …show more content…
Because liabilities and stockholders equity is used to acquire all assets, this amount should balance with total assets. Diamond Gem’s total assets of $1,180,660 are equal to their total liabilities and stockholder’s equity of $1,180,660. If the numbers didn’t match it would mean that something was not accounted for or that the numbers are wrong. Making sure that these numbers balance is a check to make sure the numbers and accounting methods are
The contract costs are the direct costs associated to with the cleaning service. They include such items as cleaning chemicals and wages to the cleaning employees. The contract cost is an important number because it allows you to figure out your profit. Without knowing your costs, it will be impossible to know if your company is making a profit …show more content…
Total current assets is made up of all items that can be easily converted to cash. Also know as a liquid assets. Contracts receivable is the amount the company is owed for previous work completed. Since we know that total current assets is made up of all current assets, we can subtract the sum of all other current assets from total current assets to get contracts receivables: $893,868-$388,818=$505,050.
Monitoring contracts receivables is very important because it affects the company 's cash flow. Diamond Gem will need cash flow for various activities. When payment is not received for services completed, that amount goes to contracts receivables. The money used to complete those services are tied up until the accounts are paid. Customers taking too long to pay for their services could have a negative effect on cash flow. Contracts receivables is seen as very similar to cash on the balance sheet. However, it is important to remember that some accounts may become …show more content…
Because liabilities and stockholders equity is used to acquire all assets, this amount should balance with total assets. Diamond Gem’s total assets of $1,180,660 are equal to their total liabilities and stockholder’s equity of $1,180,660. If the numbers didn’t match it would mean that something was not accounted for or that the numbers are wrong. Making sure that these numbers balance is a check to make sure the numbers and accounting methods are