Finance and Accounting Memo

Finance and Accounting Memo

SKS 5000 and Assignment 4

Scott Beattie

Jeffrey Fox

September 29, 2013

TO: Board of Directors for ABC Complete Kitchens, Inc.

FROM: Scott Beattie, Advisor

DATE: September 29, 2013

SUBJECT: Finance and Accounting Considerations

When opening up a new plant ABC Complete Kitchens, Inc. needs to understand some key finance and accounting terms, and what they are used for. This memo will explain some of the key finance and accounting terms that the Chief Financial Officer will need to understand, and will show how these terms are used within finance and accounting. The terms that will be covered in this memo are: assets, liabilities, owner’s equity, balance sheet, income statement, and current ratio.

ASSET, LIABILITIES, AND OWNER’S EQUITY

Assets are cash, inventory, property, plant, equipment, and other investments that the corporation has earned. Assets can be further broke down into current and long-term assets. Current assets are any type of asset that can be converted back into cash within a one year time period. Current assets include cash, short-term securities that have a low risk; accounts receivable; inventory that consists of raw materials, work in progress, and finished goods; and other current assets that include other items such as prepaid rent or insurance. Long term assets are assets that cannot be converted into cash within a one year time period, but have long terms benefits for the corporation. Long-term assets include property, plant, and equipment that the corporation owns. (Daniels, Radebaugh & Lee, 2011) When assets are listed on a balance sheet it would look like the following

Assets

Current Assets

Cash $21,000,000

Account Receivable 30,000

Inventory 5,000,000

Prepaid Expenses 10,000

Total Current Assets $26,040,000

Long-Term Assets

Fixed Assets $15,000,000

Long-Term Investments 25,000,000...