Brandywine Homecare Essay

1. Construct a Brandywines Income Statement.This income statement summarizes the partnerships performance during 2007. It reflects how oftentimes capital the company brought in as tax grosss, how ofttimes spent on expenses, and the battle among the 2 is the scratch income lucre. All figures above are in legal injury of one thousand billions. Excel rounded the depreciation survey which was 1.5 to 2 and sort out income of 1.5 to 2 as fountainhead which gave summarise expense of 11 which is actu whollyy 10.5 gazillion. I will attempt to explain the major components of this Income Statement. receipts is the first major component. The primary goal of a non-for-profit corporation is pecuniary viability which is generally given in a mission statement in terms of service to the community (Gapenski, 2008).Because most not-for-profit establishments follow a tedious set of requirements, they usually concur a tax-exempt status and heap accept and or issue tax-exempt bonds ( Gapenski, 2008). Revenues usually represent sales, precisely because in that location isnt any clientele or shareholders, revenues must be re-invested into the company. In this case, revenues can be represented by donations, coin received, payer obligation, sugar patient service, interest earned on investments, and or rental income. Expenses would be the second component of my income statement.It is plain the cost of doing business. A company has to spend money in order to make money (Gapenski, 2008). around examples of Brandywine expenses could take cost of sales much(prenominal) as utilities, buildings, salaries, labor, maintenance, administration expense, and depreciation and amortization. Net income is the last, but for certain not least. It is what is left after all expenses grant been accounted for (Gapenski, 2008). It is often referred to as a companys bottom beginning (Gapenski, 2008). Again, being that this is a not-for-profit establishment, all profits have to b e re-invested into the corporation.2. What are Brandywines 2007 net income, total profit marge, and property black market? To interpret the income statement, revenues for 2007 were 12 trillion. Expenses other than depreciation total 75% of total revenues which is 9 meg. Showing my work, I know that revenue minus total expenses twins net profit. To perish the expense amount, I simply cipher 75%*12 million to get 9 million positively charged 1.5 million of depreciation equaled 10.5 million of total expenses. Now, I lift off 10.5 million from 12 million of total revenue to get a net profit of 1.5 million. The equation for profit margin is net income of 1.5 million dual-lane by 12 million of total revenues equal 0.125 * 100% equal 12.5 % profit margin. bills flow equals net income of 1.5 million plus non interchange expenses or depreciation of 1.5 million totals 3 million. Depreciation has to be added back to get cash flow even though there is no cash value (Gapenski, 2008). 3. Supposed the company changed its depreciation calculations such that its depreciation expensed doubled. How would this change coin Brandywines net income, total profit margin, and cash flow? If we doubled the depreciation amount, it would give us 3 million. Recall that the equation for net income is total revenue minus total expenses, so we subtract total expenses of 12 million from 12 million of total revenues leaving a 0 net profit. We would experience a big rest of 1.5 million of net profit if the depreciation value doubled. For the profit margin, the equation is net profit of 0 divided by 12 million of total revenue is 0 % profit margin. Note that we have gone(p) from a 12.5 % profit margin to 0%. Cash flow is net income plus non cash or depreciation value, so we add 0 plus 3 million to give us a cash flow of 3 million which is no change from initial figure.4. Explain the difference between cash and accrual story. Be sure to include a discussion of the revenue recognition and twinned formulas. According to Gapenski 2008, the cash method is the process by which an economic event is recognized when a cash exertion actually takes place. It is considered simple and easy to use. around might want to use this method when effective starting a small business. Cash history does a good ponder of tracking cash flow, but does a poor line of reasoning of twinned revenues earned with monies laid out for expenses (Epstein, 2011). The accrual method is recognized when an obligation is created. This method is considered more complicated, however it provides a better picture of true economic status of a business.Most would say that this is the pet method according to generally applied accounting commandments (Gapenski, 2008). It has two key components such as the revenue recognition that requires that revenues be recognized in the boundary in which it was earned while the matching principle requires that an organizations expenses be matched with revenu es in which it is connected to. One might want to use this principle once a small business has gotten on its feet. The accrual method does a good job of matching revenues and expenses, but it does a poor job of tracking cash (Epstein, 2011).Because you record revenue when the transaction occurs and not when you collect the cash, your income statement can look for profitable even if you dont have cash in the bank (Epstein, 2011). 5. Explain the difference between equity function of a not for profit business and an investor-own business. According to Gapenski 2008, the financial statements of investor- owned and not-for-profit firms are similar except for transactions such as tax payments that are applicable scarcely to one form of ownership. They both strive to amplification assets and decrease debts and other liabilities however, the difference lies within the line of business (Gapenski, 2008). One difference in the remainder sheets of a not-for-profit organization and a for-pr ofit business is the nominate or title shown in its heading. In a nonprofit, the name of this financial statement is the statement of financial position. In the for-profit business this financial statement is the labyrinthine sense sheet (Accounting Coach, 2011).Another difference is the section that presents the difference between the total assets and total liabilities. The nonprofits statement of financial position refers to this section as net assets, whereas the for-profit business will refer to this section as owners equity or stockholders equity (Accounting Coach, 2011). The two types of equity shown on a business balance sheet are retained earnings and new stock sales whereas on a not-for-profit financial statement there can be retained earnings, but it cant sale common stock to raise bullion (Small Business, 2011). Non profit establishments raise funds through grants and donations for limited causes such as needs, healthcare, and education (Ramjee, 1999). Assets for inv estor-owned firms include furniture, computers, equipment, investments and certificate deposits however, a not-for-profit organizations assets are not as complex (Ramjee, 1999).