Essay on Sloane Ltd

727 Words Oct 7th, 2010 3 Pages
Sloane Ltd.
Statement of financial position
As at Dec. 31, 2009

Current Assets
Long term Assets
Software development
Liabilities and Shareholder’s equity
Current liabilities
Salary payable 32,000
Interest payable 900
Long term liabilities
Bank loan 10,000
Loan from Sloane’s wife 80,000
Shareholder’s Equity
Share capital 20,000

We have to emphasize on the loans and the deposit that they, Sloane and Eanols, each invested in the company.

Debt-equity ratio: 90,000/20,000= 4.5 This high debt-equity ratio means that their company has an aggressive approach to financing their operation growth.

Disclosures: • There are already five contracts each worth $ 6’000 for our Inter Act
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• Recommend not to increase their salary by that much, so that their expense will not increase by their salary increase, therefore they don’t have to apply more working loan. • If they are increasing their salary next year, they should record the $120,000 as wage expense and not unamortized computer software costs. • Cannot add the difference of the unamortized computer software costs to the capital because it’s their salary. • They should not recognize the revenue for the 5 contracts signed in October 2009, because the performance is not achieved yet. (Product is not developed yet and delivered). • Show no operation in 2009 • • Software development should be under inventory instead of long term assets if they want to get a bank loan next year, because higher inventory can get a higher bank loan.

Conceptual framework • Going concern: they intend to be around for a long time. • Economic entity: they consider the company as a whole and it’s not a personal company • Faithful presentation: after they do the recommendation from above, then it is consider a faithful presentation. • Periodicity: they present their statement annually • Matching: we are expensing all the expense when they occurred. • Revenue recognition: we don’t have revenue recognition this year, but we will recognize revenue next year in March when the

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