Discussion Board #2 Anne’s Beauty Salon Inc Financial Statements.xlsx Anne Marie
ID: 2561233 • Letter: D
Question
Discussion Board #2 Anne’s Beauty Salon Inc Financial Statements.xlsx Anne Marie, the owner of Anne’s Beauty Salon continues to ask questions about the financial statements. 1. What is Accounts Receivable? Is it something good? 2. I see these things called current assets and current liabilities. What are they? Why show them? 3. I still don’t understand what the Statement of Retained Earnings is all about and why do I need it. What is retained earnings? What is that thing called a dividend? Is it an Expenses? How would you respond to each of these questions? Discussion Board #2 Anne’s Beauty Salon Inc Financial Statements.xlsx Anne Marie, the owner of Anne’s Beauty Salon continues to ask questions about the financial statements. 1. What is Accounts Receivable? Is it something good? 2. I see these things called current assets and current liabilities. What are they? Why show them? 3. I still don’t understand what the Statement of Retained Earnings is all about and why do I need it. What is retained earnings? What is that thing called a dividend? Is it an Expenses? How would you respond to each of these questions? Discussion Board #2 Anne’s Beauty Salon Inc Financial Statements.xlsx Anne Marie, the owner of Anne’s Beauty Salon continues to ask questions about the financial statements. 1. What is Accounts Receivable? Is it something good? 2. I see these things called current assets and current liabilities. What are they? Why show them? 3. I still don’t understand what the Statement of Retained Earnings is all about and why do I need it. What is retained earnings? What is that thing called a dividend? Is it an Expenses? How would you respond to each of these questions?Explanation / Answer
Account Receivable is the money that company has to receive from its customers / debtors to whom the goods are sold on credit basis. Account receivable is an asset of the company i.e. it is the amount of money that company is going to receive in future.
Account Receivable is good as per company policy and structure if it is within limits but too much credit is also harmful to the health of the company, Thus account receivable should be reviewed on time to time basis and should be maintained at desired levels only.
Current Assets are the assets viz cash and other assets that will be converted into cash within 1 year from the date of reporting, it includes stock, debtor, cash and bank balance, deposit, advances, etc.
Current Liabilities are the liabilities of the company which the company has to repay within 1 year from the date of reporting viz sundry creditors, advance received, outstanding expesnes, etc.
Statement of retained earning is the statement which shows changes in retained earning from one period to reporting period and whereby it will provide profit and loss from operation, financial and investment activity during a particular period which has impacted the retained earnings. This statement is very important as it will show the imact of various items on retained earnings.
Retained earning is the amount of profit the company has kept in books of accounts which will be used in future activities i.e. invest in the core business of the company or may be used to repay exisitng debt of the company. This is the amount which company has not paid to the equity shareholders in the form of dividend.
Dividend is the amount which is given to the equity shareholders of the company. This is the amount which company will pay regularly to the equity shareholders from the Net profit earning from the particular financial year.
Dividend is not an expense of the company, it is distribution of profit with the shareholders.