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Accounting Structure and Financial Statements for a Hypothetical Company

Assume your friend, Mary, is planning to start a new business on January 1. Her idea is to open a retail clothing store in San Diego, California. Mary’s knowledge of accounting is very limited. She has hired you to handle accounting-related matters so she can stay focused on marketing and sales.

Based on this hypothetical scenario, write Mary a memo that will:

• Summarize how to determine the financial health of the business.
• Express advice for Mary on the importance of keeping good business records.
• Interpret the accounting cycle for the prospective retail clothing business.
  • Identify at least ten specific general ledger accounts that will need to be setup as part of the accounting system to track revenues and expenses.
• Explain to Mary the purpose of the income statement, retained earnings statement, cash flow statement, and balance sheet.
• Formulate a hypothetical income statement, cash flow statement, retained earnings statement, and balance sheet for a three year period (current year, plus two subsequent years). (These statements are intended to give Mary an understanding of how the financials will look for the future periods.)
  • List all your important assumptions as footnotes to each financial statement.
  • Use proper financial statement formatting.
• Analyze the financial statements you created.
  • Recommend five substantive items related to short-term liquid assets, long-term assets, current liabilities, long-term liabilities, and stockholder’s equity to Mary. (There should be one recommendation for each of the categories and they should focus on revenue growth, expense reduction, asset protection, risk mitigation, or shareholder wealth.)

The Accounting Structure and Financial Statements for a Hypothetical Company paper

• Must be six to eight double-spaced pages in length (not including title and references pages) and formatted according to APA Style
• Must include a separate title page with the following:
  • Title of paper
  • Student’s name
  • Course name and number
  • Instructor’s name
  • Date submitted
• Must use at least two credible and/or professional sources in addition to the course text.