Transaction Analysis and Statement of Cash Flows Preparation Essay

1783 Words Aug 29th, 2011 8 Pages
UVA-C-2297
July 28, 2009

DOG CONCIERGES, LLC: TRANSACTION ANALYSIS AND STATEMENT OF CASH FLOWS PREPARATION

Part I Although he owned his own business, Jeff Birch was a financial novice. His passion was dogs, and he had finally made the move to start a specialty dog services business in an upscale section of a large mid-Atlantic city. In its first two years, Dog Concierges, LLC, had grown to about $650,000 in sales. Historically, he had left all financial concerns in the hands of his sister, Jennifer Birch, an aspiring CPA. But she had recently graduated from college and was leaving in a month to start her career in Atlanta. Jeff had asked her to give him a crash course in Accounting 101, so he had some handle on the accounting
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He decided to also use the Dog Concierges, LLC, statement of cash flows for the previous year (see Exhibit 5) and the balance sheet as of the end of the previous year (see Exhibit 2), to re-create the balance sheet for the year ended two years earlier. He thought he’d be finished in time to make his 4:00 p.m. tee time.

-4Exhibit 1 DOG CONCIERGES, LLC: TRANSACTION ANALYSIS AND STATEMENT OF CASH FLOWS PREPARATION Details of the Basic Accounting Equation

UVA-C-2297

Assets (A) Current Assets Cash A/R Inventory Ppd/A Noncurrent Assets Buildings Land Vehicles Investments

=

Liabilities (L) Current Liabilities A/P W/P I/P T/P Noncurrent Liabilities Bonds payable Long-term loan Short-term loan

+

Owners’ Equity (OE) Contributed Retained Capital Earnings Net income (Dividends)

Revenues

(Expenses)

Note: A/R = accounts receivable Ppd/A = prepaid assets A/P = accounts payable W/P = wages payable I/P = interest payable T/P = taxes payable

Source: Adapted from a similar exhibit presented in Mark Haskins, The Secret Language of Financial Reports (New York: McGraw-Hill, 2008).

-5Exhibit 2 DOG CONCIERGES, LLC: TRANSACTION ANALYSIS AND STATEMENT OF CASH FLOWS PREPARATION Balance Sheets as of December 31 (in thousands) This Year $100 100 120 320 320 80 $720 $180 30 210 200 410 120 190 $720 Last Year $110 90 100 300 280 100 $680 $130 40 170 220 390 110 180 $680 Change –10 +10 +20

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Cash Accounts receivable Inventory Total current

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