Analysis of Polly Pet Food Financial Statement
BUS 5110 – Unit 1 assignment
University of People
Financial statements are reports that is detail outline of the important financial accounting
information about your company (Bragg, 2019). The financial statements consist of income
statement, the balance sheet, and the statement of cash flows.
1. Balance Sheet - The balance sheet indicates what the company owns (assets such as
cash, accounts receivable and equipment) and what the company be obligated (liabilities
such as accounts payable and loans) (Investopedia, 2020). Any outstanding difference
between these two sums (the assets and the liabilities) determines what goes to the
owners. The balance sheet is based on the basic equation: Assets = Liabilities + Equity.
2. Income Statement - The income statement indicates how the company performed for a
fixed period. It collects information over a set period (normally annually, monthly, or
quarterly). Main components of the income statement include revenue and expenses
(Investopedia, 2020).
3. Cash flow statement - The cash flow statement shows in flow and out flow of cash for a
fixed period. The cash flow statement tells investors and creditors about the credit
worthiness of the business, where the business is getting its cash from, and on what it is
using its cash (Investopedia, 2020).
Polly's Pet Products
Balance Sheet as of December 31, 2018
ASSETS
CURRENT ASSETS
Cash 100,000
Accounts receivable 50,000
Other assets 25,000
Total current assets 175,000
LONG TERM ASSETS
Fixed Assets 75,000
TOTAL ASSETS 250,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 75,000
Accrued expenses 30,000
Income tax payable 5,000
Current portion of notes payable 12,000
Deferred income taxes 1,500
Total current liabilities 123,500
LONG TERM LIABILITIES
Notes payable (long term) 38,000
TOTAL LIABILITIES 161,500
STOCKHOLDERS' EQUITY
Common stock 5,000
Additional paid-in capital 15,000
1. Cash is the current asset on the balance sheet. The amount is $100,000 (Accounting Hub,
n.d.).
2. Total Current Assets on the balance sheet is the total of Cash, Accounts Receivable and
other assets. The amount is $175,000 (Accounting Hub, n.d.).
3. Total Assets on the balance sheet consists of current assets and fixed assets such as Plant,
Equipment, Patents, Goodwill etc. The amount is $175,000 + $75,000 = $250,000
(Accounting Hub, n.d.).
4. Accrued Expense are the expenses which are incurred but not paid yet. The amount is
$123,000-75,000-5,000-12,000-1,500 = $30,000 (Accounting Hub, n.d.).
5. Notes Payable are written promissory notes in which one party promise to pay the other
party a specific sum of cash. The amount is $161,500-123,500 = $38,000 (Accounting
Hub, n.d.).
6. Stockholders' equity is calculated by subtracting its total liabilities from its total assets.
It is the owners' residual claim on assets when debts have been paid. Stockholders’
Equity = Total Assets – Total Liabilities. The amount is $250,000-161,500 = $88,500
(Accounting Hub, n.d.).
7. Retained earnings (RE) is the amount of net income for the company after it has paid
out dividends to its owner or stockholders. The amount is $88,500-15,000-5,000=
$68,500 (Accounting Hub, n.d.).
8. Total Liabilities & Stockholders' equity represents how much a company would have
in assets if the company went out of business immediately. The amount is $250,000
(Accounting Hub, n.d.).
The objective of financial statements is to deliver information about the financial position,
performance, and variations in financial position of a company that is useful to a wide range of
users in reaching economic decisions. Financial statements are useful when it’s clear, relevant,
reliable and comparable (Bragg, 2019).
Managers uses financial statements for tactical alternatives and approaches are effective
in its growth. Benchmarking financial results according to affordability on the market helps
managers to define areas of strength or weakness and improves to make savings, budgets, and
operating judgments (Accounting for Managers, n.d).
References
Accounting for Managers. (n.d.) Accounting for Managers - Table of Contents.
https://2012books.lardbucket.org/books/accounting-for-managers/index.html.
Accounting Hub. (n.d.). Accounting. Boundless.com CC BY-SA 4.0. http://oer2go.org/mods/en-
boundless/www.boundless.com/accounting/index.html
Bragg, S. (2019, November 4). The purpose of financial statements.
https://www.accountingtools.com/articles/what-is-the-purpose-of-financial-
statements.html.
Investopedia. (2020, January 29). The Three Major Financial Statements: How They're
Interconnected. Investopedia. https://www.investopedia.com/ask/answers/031815/how-are-
three-major-financial-statements-related-each-other.asp.
