Anne’s Beauty Salon Financial Statements

Anne’s Beauty Salon Financial Statements

Accounts receivable refer to amounts of money owed to a firm due to goods and services delivered or used yet to be paid by customers. They are considered current assets in the balance sheet of a business (Carlson et al., 2020). Typically, accounts receivable arise from purchases made on credit by customers. For Anne’s Beauty Salon, accounts receivable would reflect the amount of money owed to the salon pending services offered to clients. Accounts receivable are good for a business because they are current assets. Further, they are crucial because they form a fundamental basis for analyzing the financial health of a business. A high level of accounts receivable in an organization’s balance sheet could indicate high liquidity (Wang et al., 2022). Thus, the company can meet its short-term obligations using accounts receivables. Get in touch with us at eminencepapers.com. We offer assignment help with high professionalism.

Current assets refer to a business’s short-term assets that can be easily converted into money to meet maturing obligations. They include pre-paid liabilities, marketable securities, stock inventory, accounts receivable, cash equivalents, and cash. On the other hand, current liabilities refer to a business’s short-term maturing obligations that require payment within one year. They include items like accounts payable, accrued expenses, and payroll due. According to Lessambo (2018), showing current assets and liabilities is essential because they offer insight into the business’s financial health regarding its liquidity and ability to pay short-term obligations as and when they fall due.

The statement of retained earnings is a financial document highlighting the earnings that have been earned and accumulated by the business in a given financial period. Anne’s Beauty Salon Business will need the statement to offer insight into the business’s financial position and the perception of its owner regarding business growth through reinvestment. According to Ball et al. (2020), retained earnings are a portion of the business’s profits left in the company as a form of reinvestment. On the other hand, dividends are the payments made to the business owners from the retained earnings on every share held in the company. Dividends are not expenses because they do not reduce the net income of a business.

References

Ball, R., Gerakos, J., Linnainmaa, J. T., & Nikolaev, V. (2020). Earnings, retained earnings, and book-to-market in the cross-section of expected returns. Journal of Financial Economics, 135(1), 231-254.

Carlson, M. A., D’Amico, S., Fuentes-Albero, C., Schlusche, B., & Wood, P. R. (2020). Issues in the use of the balance sheet tool. http://dx.doi.org/10.17016/FEDS.2020.071

Lessambo, F. I. (2018). Short-term liabilities and working capital. In Financial Statements (pp.75-79). Palgrave Macmillan, Cham.

Wang, C., Chen, X., Xu, X., & Jin, W. (2023). Financing and operating strategies for blockchain technology-driven accounts receivable chains. European Journal of Operational Research, 304(3), 1279-1295.

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Anne’s Beauty Salon Financial Statements

Anne Marie, the owner of Anne’s Beauty Salon continues to ask you questions about her financial statements.
What is accounts receivable? Is it something good?
I see these things called current assets and current liabilities. What are they? Why show them?
I still don’t understand what the Statement of Retained Earnings is all about and why I need it. What is retained earnings? What is that thing called a dividend? Is it an expense?
How would you respond to each of these questions?