2021

Financial Statements of Polly’s Pet

Department of MBA, The University of the People

BUS 5110 - Managerial Accounting

Dr. Rebecca Attah

November 17, 2021

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Financial Statements of Polly’s Pet

1. Statement of Cash Flows is a financial statement that shows how changes in balance

sheet accounts and income affect cash and cash equivalents, and breaks the analysis down

to operating, investing, and financing activities. Essentially, the cash flow statement is

concerned with the flow of cash in and out of the business (Accounting Hub, (n.d.).

Blank financial account lines

• Cash paid out to suppliers and employees

This includes cash paid to suppliers and employees to make the products of the company

Cash paid out to suppliers and employees = Net cash provided by operating activities – Other

Cash Flows from Operating Activities = 185,000 - (600,000 – 50,00 -10,000) = -400,000

• Net cash provided by financing activities

This includes all cash activities used to fund the company.

Net cash provided by financing activities = Sum of all balances under this section = 50,000 -

45,000 + 5,000 = 10,000

• Net change in Cash

Amount of cash change in a company during the concerned year.

Net change in Cash = Net cash provided by operating activities + Net cash used in investing

activities + Net cash provided by financing activities = 185,000 - 25,000 + 10,000 = 170,000

• Cash balance, end of year

This is the amount of cash a company has at the end of the concerned year.

Cash balance, end of year = Cash balance, beginning of year + Net change in Cash = 30,000 +

170,000 = 200,000
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Financial Statements of Polly’s Pet

2. Balance Sheet: sometimes called the statement of financial position, lists the company's

assets, liabilities, and stockholders' equity (including dollar amounts) as of a specific

moment in time (Accounting Hub, (n.d.).

Blank financial account lines

• Total current assets

This is the sum of all current assets in the company, including cash and cash equivalents.

Total current assets = Sum of all current assets = 200,000 + 50,000 + 25,000 = 275,000

• Total assets

This is the amount of all the assets a company owns.

Total assets = Total current assets + Long term assets + Fixed assets = 275,000 + 75,000 =

350,000

• Accrued expenses

This represents all the amounts that a company's obligation to pay for goods and services that

have been provided for which invoices have not yet been received

Accrued expenses = Total current liabilities - other current liabilities = 123,500 - (75,000 + 5,000

+ 12,000 + 1500) = 30,000

• Notes payable (long term) or Total Liabilities

These are long-term liabilities that indicate the money a company owes its financiers.

Notes payable (long term) or Total Liabilities = Total liabilities - Total current liabilities =

161,500 - 123,500 = 38,000

Since it’s the only balance under the long-term liabilities section.

• Total Liabilities and Stockholders’ equity = Total Assets = 350,000

• Total stockholders' equity

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Financial Statements of Polly’s Pet

This amount represents how much the investors have in a company

Total stockholders' equity = Total Liabilities and Stockholders’ equity - Total Liabilities =

350,000 - 161,500 = 188,500

• Retained Earnings

This is the amount of net income left over for the business after it has paid out dividends to its

shareholders.

Retained Earnings = Total stockholders' equity – other stockholders' equity = 188,500 - (5,000 +

15,000) = 168,500

3. Income Statement: is a company's financial statement that indicates how the revenue is

transformed into the net income (Accounting Hub, (n.d.).

Blank financial account lines

• Operating Costs

These are the ongoing expenses incurred from the normal day-to-day of running a business.

Operating Costs = Revenues - Gross Profit = 650,000 - 205,000 = 445,000

• Operating Income

This represents the income a company generates from its day-to-day business before deducting

taxes and other expenses.

Operating Income = Gross profit - General and Administrative Expenses = 205,000 - 75,000 =

130,000

• Income Before Provision for Income Taxes

This is the operating income excluding other expenses.

Income Before Provision for Income Taxes = Operating Income - Other Expenses = 130,000 –

60,000 = 70,000
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Financial Statements of Polly’s Pet

• Net Income

This Income a company generates after deducting all expenses including taxes.

Net Income = Income Before Provision for Income Taxes – Taxes = 70,000 – 5,000 = 65,000

Polly’s Pet Performance

• The company is performing well in terms of profitability and how it is efficiently

managing its overall costs. Basically, each dollar generated as income, 32 cents are

earned.

Operating Margin = Income from Operations / Net Revenues = 32%

• Polly’s Pet is relying mainly on its own money to generate income as the amount of its

current assets is double the amount of its current liabilities.

Working capital = Current Assets / Current Liabilities = 2,23

• Confirming the above notion, from the Debt-to-equity ratio we can conclude that, the

company holds less debt than the owners share.

Debt to equity ratio = Total Liabilities / Shareholders Equity = 0,86

References

Accounting Hub. (n.d.). Accounting. Boundless.com CC BY-SA 4.0. Chapter 3 Retrieved from:

http://oer2go.org/mods/en-boundless/www.boundless.com/accounting/index.html

Heisinger, K., & Hoyle, J. B. (n.d.). Accounting for Managers. Chapter 1.Retrieved from:

https://2012books.lardbucket.org/books/accounting-for-managers/s05-02-planning-and-control-

functions.html

Beginners’ Guide to Financial Statement. (2007, February 5). Sec.Gov.

https://www.sec.gov/reportspubs/investor-publications/investorpubsbegfinstmtguidehtm.html