Purpose Of Assignment: The Purpose Of This Assignment Is For

Purpose Of Assignmentthe Purpose Of This Assignment Is For Students T

The purpose of this assignment is for students to initiate and complete a comprehensive financial plan. The ultimate result will be a set of pro forma financial statements including an Income Statement, Balance Sheet, and Cash Flow Statement. The student will develop requisite assumptions about the dollar values to be budgeted. We will use the profit and loss statement you created in week four to create the first year balance sheet and cash flow statement for your company.

Assume this is the first year of your business. Use the week 4 profit and loss statement from year 1 for the purpose of creating your balance sheet and cash flow statement. Create a balance sheet and cash flow statement addressing the instructor's findings from previous class assignment(s) by doing the following: Conduct an internet search or use an example located in the textbook as a template to create a balance sheet and cash flow statement. Review the revenue and expense items based on comments made by the instructor, if any, from week four to best estimate realistic values for the balance sheet and cash flow statement. Explain the order in which the financial statements are prepared and how they are connected. Look for an example I will have posted in class in week four and will repost in week five which shows all three financial statements with sample data and how they are connected.

Format assignment consistent with APA guidelines. Submit your assignment.

Paper For Above instruction

The process of preparing financial statements is fundamental to understanding a company's financial health and planning future activities. The sequence begins with the Income Statement, which provides a summary of revenues and expenses over a specific period, leading to net income or loss. This net income figure then directly influences the Equity section of the Balance Sheet and is also used in the Cash Flow Statement to analyze cash inflows and outflows. The interconnectedness of these statements allows for comprehensive financial analysis and informed decision-making.

In developing the first-year financial statements for a new business, it is essential to begin with the profit and loss statement created in week four. This statement identifies the company's anticipated revenues and expenses, providing a basis for projecting other financial figures. Using this information, a balance sheet can be constructed to estimate assets, liabilities, and equity at the end of the first year. Likewise, the cash flow statement can be prepared to demonstrate how cash is expected to move in and out of the business, considering operating activities driven by the profit and loss statement.

The creation of these financial statements necessitates gathering realistic data, which can be achieved through internet research or referencing example templates from textbooks. Adjustments should be made based on instructor comments to refine estimates. The order of preparation begins with the income statement, as it informs the net income required for the balance sheet and cash flow statement. Understanding the flow and connection among these statements enhances the accuracy of financial planning and provides a comprehensive view of the company's fiscal position.

In conclusion, the integrated preparation of pro forma financial statements—starting with the income statement, then the balance sheet, and finally the cash flow statement—serves as a critical process in startup financial planning. This approach ensures consistency, improves financial insight, and supports strategic decision-making necessary for business success.

References

  • Brigham, E. F., & Houston, J. F. (2021). Fundamentals of Financial Management (15th ed.). Cengage Learning.
  • Fraser, L. M., & Ormiston, A. (2016). Understanding Financial Statements (10th ed.). Pearson.
  • Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2020). Financial Accounting (12th ed.). McGraw-Hill Education.
  • Horngren, C. T., Sundem, G. L., & Elliott, J. A. (2019). Introduction to Financial Accounting (11th ed.). Pearson.
  • Investopedia. (2023). How to Prepare Financial Statements. https://www.investopedia.com/articles/financial-theory/08/financial-statements.asp
  • Corporate Finance Institute. (2022). Financial Statements (Balance Sheet, Income Statement, Cash Flow Statement). https://corporatefinanceinstitute.com/resources/knowledge/accounting/financial-statements/
  • Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2022). Financial Accounting (13th ed.). McGraw-Hill Education.
  • Anthony, R. N., & Govindarajan, V. (2019). Management Control Systems (14th ed.). McGraw-Hill Education.
  • Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2021). Intermediate Accounting (16th ed.). Wiley.
  • McKinney, R. G., & Dora, M. (2020). Financial Statement Analysis. Journal of Accountancy, 230(3), 76–83.

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