Date Accounts Debit Credit
5-Sep Salary Expense 420 Cash 420 to record salary paid
10-Sep Accounts Payable 9,000.00 Baking Supplies 9,000.00 to record purchase of baking supplies
10-Sep Telephone Expense 45 Cash 45 to record payment of phone bill
15-Sep Prepaid Rent 1,500.00 Cash 1,500.00 to record prepaid rent
19-Sep Miscellaneous Supplies 325 Cash 325 to record purchase of miscellaneous supplies
20-Sep Salary Expense 456 Cash 456 to record salary paid
30-Sep Cash 22,500.00 Sales Revenue 22,500.00 to record bakery sales
30-Sep Telephone Expense 45 Outstanding Expenses - telephone 45 to record outstanding expenses
30-Sep Retained Earnings 2,000.00 Dividends Payable 2,000.00 to record dividend liability
30-Sep Dividend Payable 2,000.00 Cash 2,000.00 to record payment of dividend
Address the following issues
￼1. Ratio Analysis
a) Create a ratio analysis. Be sure to include all relevant ratios.
b) Discuss each ratio. What does the ratio tell you?
c) Why is ratio information useful? What decisions will you make based on the ratio?
2. Prepare a Memo to a Bank
a) Provide an overview of the company’s accounting system. What basis of accounting is used? Why?
b) What strategies is the business using to ensure responsible accounting practices? Why have these strategies been selected?
c) Describe the overall accounting process. For example, when are
entries made, how often are statements produced and reviewed, and why?
Describe the internal controls for cash that are in place.
d) Analyze the results of operations. What do these results tell a business?
e) What do the statements themselves tell about the strengths and
weaknesses of the company’s financial position? What does the ratio
tell someone about the strengths and weaknesses in the company’s financial position?
f) Discuss the changes in operations that might need to be made to make
the company more profitable. Justify why each change may be
g) What are the company’s financial strengths and weaknesses? What specific changes can be made to alleviate the weaknesses?
h) What opportunities can the company explore because of its strengths? How would these be beneficial?
Length: 5 pages (1474 Words)
Ratio analysis is the quantitative comparison of organization’s financial statement groups or accounts. The comparison helps creditors, investors and the management team of the organization, to understand better the performance of the organization and areas, which may need improvement. The common instrument used for the purpose of analyzing the entity’s financial standing is the financial ratios. Financial ratios are grouped into six major categories: solvency ratios, efficiency ratios, liquidity ratios, profitability ratios, financial leverage ratios, and market share ratios.
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