Measuring And Representing Knowledge Economy

Transaction in the company

Discuss about the Measuring and Representing Knowledge Economy.

This report has been prepared to investigate the numbers of the Violet Chan’s consultancy Pty ltd. Before preparing this report, the activities and transaction of the company has been evaluated and for that preparation of journal entries, ledger account, trail balance, profit and loss account, balance sheet and calculation of ratio analysis has been done. This report depict that the performance of  the company is not impressive and the company is required to manage and maintain various expenses and required to make change into the assets management, equity and debt level to enhance the profitability, liquidity and debt position of the company. In this report, the comparative study has also been done to found and analyze the changes into financial performance of the company from last year.

According to the last year’s balance sheet of the company, it has been analyzed that the performance of the company was bit better than current year as the company was able to make at least the profit. But according to the current situation of the company, the company has faced the situation of net loss. The current scenario of capital structure and the debt equity, debt assets and equity ratio was almost similar as last year (Assessment, 2013). No extra changes have been done by the company to manage and change the level of the company, according to the performance of the company, it has been analyzed that the company is required to make various changes into its activities and performance to manage the profits. Owner is investing various capitals into the company but this amount is not used by the company in a proper manner and that is why the excess problems are faced by the company. Further, the level of the total assets, debt and equity has been analyzed and it has been found that the level of total assets has been enhanced whereas the level of debt has been reduced and the level of total equity of the company has also been enhanced from financial year 2015 in financial year 2016. The average performance of the company expresses that the company has not managed a good level of equity (Whittington, 2008). The company is suggested to reduce the level of total assets to maintain the business in a good manner.

Various transaction of the company has been studied in the month of June. The main transaction was contributing more money into the account which was not required by the company. The owner has contributed $ 17,000 more into the capital of the company. Further, a new computer has also been bought by the company on credit and the payment has not been made by the company (Lee, 2006). Company has paid various monthly expenses in cash such as salary, wages, rent, advertisement, telephone bill etc. Company has bought furniture on credit basis and later on the entire amount has been paid by the company to its creditors. Company has also depreciated the old and new furniture and the old and new computer according to the SLM depreciation management” href=”https://#”>SLM depreciation management (assumption). Thus through these analysis, it has been found that the company has not made any special transaction to manage the level of equity, assets, debt of the company. And company has also not made any extra effort to enhance the revenue of the company, only $ 200 has been spent by the company on advertisement. According to the evaluation of all of these, it has been found that the average performance of the company expresses that the company has not managed a good level of equity (Glasson, Therivel & Chadwick, 2013). The company is suggested to reduce the level of total assets to maintain the business in a good manner.

Ratio analysis

Ratio analysis study has been performed over the Violet Chan’s consultancy Pty ltd. The study of ratio analysis of the company depict that the return on assets of the company is -2.29% which depict that the performance of the company is not well and the company is facing various losses in the market (Dye & Sunder, 2001). Through this analysis, it has been found that the net profit of the company is $ -1146 and the total assets of the company is $ 50,054. Further, it has been investigated that the current ratio of the company is 9.72:1 which depict that the current assets of the company is 9.72 times more than the current liabilities of the company.

The current ratio of the company depict that the liquidity position of the company has been worst and it express that the company is required to reduce the level of current assets of the company to manage the liquidity position of the company. The current assets of the company are $ 40,854 and the current liabilities of the company are $ 4,200 which express that the company must reduce the level of the current assets of the company (Laux & Leuz, 2009).

Further, the assets turnover ratio of the company has been analyzed and it has been found that the ratio of the company is 0.1208 which express that the total sales are 0.12 times of the total assets of the company. The total sales of the company are $ 6,050 and the total assets of the company are $ 50,054. According to this analysis, it is suggested top the company to reduce the level of current assets. Company is not required to manage and maintain this much of assets as the less level of total assets would also be sufficient for the company and the current level would enhance the cost of the company only (Whittington, 2008).

More, the debt to equity ratio of the company has been analyzed. Through this ratio, it has been found that the debt- equity relation of the company is 0.0915:1 which express that the debt of the company is 0.09 times of the total equity of the company. The total debt of the company is $4,200 whereas the total equity of the company is $ 45,854 which express that the capital structure of the company is not at all good (Daly & Farley, 2011). Company is required to reduce the level of equity which could be done through withdrawing the amount from the capital account of the company to maintain an optimal capital structure on the company .( Schroeder, Clark & Cathey, 2001)

Conclusion

More, the debt to assets ratio of the company has been analyzed. Through this ratio, it has been found that the debt- asset relation of the company is 0.083:1 which express that the debt of the company is 0.08 times of the total assets of the company. The total debt of the company is $4,200 whereas the total assets of the company are $ 50,054 which express that the company has not managed a good level of debt and equity (Arewa, 2006). The company is suggested to reduce the level of total assets to maintain the business in a good manner.

More, the equity to assets ratio of the company has been analyzed. Through this ratio, it has been found that the equity- asset relation of the company is 0.92:1 which express that the equity of the company is 0.92 times of the total assets of the company. The total equity of the company is $45,854 whereas the total assets of the company are $ 50,054 which express that the company has not managed a good level of equity. The company is suggested to reduce the level of total assets to maintain the business in a good manner.

Conclusion:

Through this report, calculation of ratio analysis, preparation of journal entries, ledger account, trail balance, profit and loss account, balance sheet etc, it has been analyzed that the company is required to manage the level of the assets management and equity to maintain the business in a good manner. The company is suggested to look over the activities and transaction of competitive business and make a good decision accordingly. Through this case study, it has been found that this company is not able to manage the capital structure in a good manner and the turnover of the company is also not good. The comparative study of financial year 2015 and financial year 2016 depict that any extra efforts have not been made by the company to manage the performance and profitability position of the company. So the company is suggested to enhance the expenditure on advertisement and promotion and reduce the level of total assets and total equity.

References:

Arewa, O.B., (2006). Measuring &representing the knowledge economy: accounting for economic reality under the intangibles paradigm. Buff. L. Rev., 54, p.1.

Assessment, W.S.B.P., (2013). Conceptual Framework.

Daly, H. E., &Farley, J., (2011). Ecological economics: principles &applications. Isl&press.

Dye, R.A. &Sunder, S.,(2001). Why not allow FASB &IASB standards to compete in the US?. Accounting horizons, 15(3), pp.257-271.

Glasson, J., Therivel, R., &Chadwick, A., (2013). Introduction to environmental impact assessment. Routledge.

Laux, C. &Leuz, C., (2009). The crisis of fair-value accounting: Making sense of the recent debate. Accounting, organizations &society, 34(6), pp.826-834.

Lee, T.A., (2006). The FASB &accounting for economic reality. Accounting &the Public Interest, 6(1), pp.1-21.

Schroeder, R.G., Clark, M.W. &Cathey, J.M., (2001). Accounting theory &analysis. Chapel Hill: University of North Carolina.

Whittington, G., (2008) (B). Fair value &the IASB/FASB conceptual framework project: an alternative view. Abacus, 44(2), pp.139-168.

Whittington, G., (2008). Fair value &the IASB/FASB conceptual framework project: an alternative view. Abacus, 44(2), pp.139-168.