ACC 317 Project One – WorkBook and Analysis Paper
Financial Components Included in the Current Liabilities and Assets Section
All assets that a firm expects to convert into cash in less than a year are regarded to be current assets. Often, they are employed to gauge a business’s liquidity. On a balance sheet, an organization’s assets are classified into two categories: current and non-current assets. Accounts receivable, prepaid insurance, prepaid rent, merchandise inventory, and cash are the financial elements shown in the current assets part of the Balance Sheet for Batter Up Company. A company’s cash reserves may be made up of cash, certificates of deposit, savings bonds, or money invested in mutual funds. The value of the products that are prepared for sale is known as the merchandise inventory. Because the money can be utilized later to lower the total amount when incurred, prepaid rent and insurance are regarded as assets. Due to their ability to be turned into cash quickly, accounts receivables are regarded as current assets.
Subsequently, a business entity’s financial obligations that are payable and due within a year are referred to as current liabilities. When a company engages in a deal that raises the possibility of a future outflow of funds, that business has created a liability. The balance sheet for Batter Up Company’s current liabilities section includes various financial components. They include notes payable, interest payable, wages payable, and accounts payable. Since they are all debts to be paid by the company, they are all considered liabilities.
Difference between Current Assets and Liabilities Justification
A corporation’s assets and liabilities are displayed on its balance sheet. Assets and liabilities classified as current are those that will be paid off or turned into cash in a year. The balance sheet is arranged so that the obligations are listed according to maturity, and the assets are listed according to liquidity. Certain assets and obligations may contain both short- and long-term components. When evaluating the financial well-being of a firm, understanding the difference between current assets and liabilities is essential. Focusing on the liquidity and maturity of these assets allows creditors and investors to make more sound decisions regarding a company’s ability to pay its short-term obligations. It is also important to keep in mind that the same liability or asset may have both long-term and short-term components based on the terms of repayment. To identify discrepancies or shifts in current assets and liabilities over time, variance analysis can be employed.
Further, a balance sheet is essentially an instantaneous representation of the financial standing of a business. Examining the elements of current assets and liabilities can help creditors and investors better understand a firm’s short-term financial prospects. There are various ways to identify data variations for current assets and liabilities using various tools. These may consist of business intelligence software, trend analysis, cash flow analysis, ratio analysis, and comparative analysis. To find out if there are any differences from historical data, ratio analysis can be used to calculate ratios like the debt-to-equity ratio. Additionally, trend analysis investigates past data to see if any patterns exist. Cash flow analysis tracks the movement of money in and out of the business to look for trends (Fridson & Alvarez, 2022). Examining the financial information and contrasting its equivalent from a comparable business constitutes comparative analysis. Software for business intelligence can be utilized as a tool for data collection, archiving, and analysis. With the use of this kind of software, data can be gathered for comparative, trend, cash flow, ratio, and other analyses.
Importance of Footnotes
Additional details about the type and makeup of the current assets and liabilities are provided in the footnotes. For instance, the short-term loan conditions shown as a current debt or the precise inventory categories included in the balance for inventory may be clarified in a footnote. In essence, this information can help stakeholders comprehend the risk associated with these products and any factors that might have an impact on their liquidity or value (Albanese et al., 2021). Information about any potential risks or contingencies related to current assets and liabilities may also be included in the footnotes. An unresolved legal claim that could impact accounts receivable or a potential change to regulations that could impact accounts payable could be found in a footnote, for instance. Notably, this information can help decision-makers evaluate the potential effects of these risks on the company’s financial situation. Subsequently, the balance sheet amounts alone are not sufficient in providing the information this is because it may not provide all of the necessary information for decision-making because it just identifies a firm’s assets and liabilities, not how well the company is performing.
Why FIFO is the Best Choice for the Given Company
For a business operating in an economy where prices are rising or that sells goods with a short shelf life, like perishable commodities, FIFO is a good choice. Notably, this is because FIFO usually leads to higher ending inventory values, which can help the company obtain more advantageous credit conditions and higher cost of goods sold, which lowers taxable revenue. Because it will result in less taxable revenue, using FIFO is more appropriate for our company, Batter Up, as they are showing the cost of goods sold increase.
FASB Codification
FASB Codification ASC 305: Cash and cash equivalents
FASB Codification ASC 330: Inventory
FASB Codification ASC 310: Receivables
References
Albanese, C., Crépey, S., Hoskinson, R., & Saadeddine, B. (2021). XVA analysis from the
balance sheet. Quantitative Finance, 21(1), 99-123.
Fridson, M. S., & Alvarez, F. (2022). Financial statement analysis: a practitioner’s guide. John
Wiley & Sons.
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Question 
ACC 317 Project One Guidelines and Rubric
Competency
In this project, you will demonstrate your mastery of the following competency:
• Evaluate financial statement components for adherence to accounting principles and methods
• Apply accounting principles and methods to current assets and liabilities
Overview
ACC 317 Project One – WorkBook and Analysis Paper
As a professional accountant, you are responsible for adherence to accounting principles and methods when working with clients. Depending on the specific market that you will work in, it is important to know how large to small businesses should organize their finances. This project gives you the opportunity to put that skill set into practice by reviewing transactions of a small business just starting up. Remember, you will more than likely work with a range of clients over your professional career and may need to explain the process and provide a rationale for the financial processes and procedures to ensure they are successful in maintaining their financial records.
As with any financial records, accuracy is key. It is imperative to keep accurate and complete records. You will have the opportunity to correct any errors in the previous Milestone Journal Entries and Milestone Inventory tabs.
You will notice as you work through both projects, that you will need to provide more than just the numbers. You will need to explain the financial data and provide evidence of your calculations. This will prepare you with a solid foundation as a future accountant.