Financial Statements Preparation (Essay Sample)

Financial Statements Preparation
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Revenue and Expenses Review
The revenue for the two financial years reflected in the income statement prepared has been calculated by considering the sales made on cash and credit. The cash sales and accounts receivable have been added to determine the total sales revenue realized in each of the financial years CITATION Gra19 \l 1033 (Graybeal, Cooper, & Franklin, 2019). The accounts receivable implies the sales the business sold to the customers on credit with a promise of realizing the cash in the future CITATION Bas19 \l 1033 (Basioudis, 2019). Similarly, a comparison of the sales revenue between the 2019 financial year and 2020 financial indicates it increased. The sales revenue increased in the 2020 financial year due to the enhanced marketing campaign investment undertaken.
The cost of goods reflected in the income statement has been derived from the direct costs incurred to procure the materials employed to produce the final products sold and transport costs CITATION Hoy20 \l 1033 (Hoyle, Skender, & Kratz, 2020). The cost of goods incurred has been deducted from the sales revenue to determine the gross profit in each financial year. In contrast, the total expenses have been computed by adding the utility cost, wages and salaries cost, rent, and marketing cost incurred in each of the respective years. Consequently, the total operating expenses in each year have been deducted from the gross income to compute the operating income.
Balance Sheet Statement
A balance sheet financial statement is critical in demonstrating the financial position of a given company. The balance sheet statement is comprised of the assets, liabilities, and equity components CITATION Wey20 \l 1033 (Weygandt, Kimmel, & Kieso, 2020). The total assets reflected in the balance sheet statement are categorized into current and long-term assets. The current assets are assets with a lifespan of less than one financial year. In contrast, long-term assets have a lifespan of more than one financial year CITATION Sch19 \l 1033 (Schroeder, Clark, Cathey, & Schroeder, 2019).