Introduction
The existence of the business is imprecise; therefore disintegrating the time period into controllable episodes of 12 months allows the business to assign profits, operating cost, revenues to a specific interlude. The balance sheet describes what the trade has at the beginning of each episode. This also facilitates the owners to compensate themselves with the proceeds being produced and for the trade to pay its levy to the tax office. In this paper; there are a few aspects of the balance sheet that can affect the companies profit if changed.
They include:
H9 Account receivable
Any augment in accounts receivable have got to be deducted from the accumulation net profit since it symbolizes sales incorporated in the net profit, however not yet gathered in cash. Therefore any reduction in accounts receivable ought to be added to the accumulation net profit since it symbolizes cash collections that are not incorporated in the net profit for the existing accounting period. A reduction in accounts receivable has the opposite effect
Therefore in the balance sheet, if by assumption the account receivable were to increase by 4%, then we would have an increase of the total assets by to 42, 428,973. Considering that all the other figures remain constant, and trying to balance the balance sheet, then there would be an increase in income by 19, 419.64 and vice versa if the account payable was to be reduced.
H11 other assets
Other assets are effects that do not feature either fixed or current assets category, yet still fit in on the balance sheet. They comprise prepaid expenses, which have worth nevertheless are not fixed or automatically to be transformed into cash worth throughout the present business year. As much as they are not twisted into cash effortlessly, are projected to be bowed into cash within a year or so, they are a break or make of the company. Increasing this segment increases the overall assets numbers and aid in increasing profit. Vice versa is true
As well by increasing the other assets segment in the balance sheet by assumedly 4%, then there will be an increase in total assets by 7019.16. Assuming all other figures remain constant, then the total income will as well rise by this amount. And the vice versa is true
H20 account payable
This the money which a corporation owes to dealers for merchandise acquired on credit. This article shows on the corporation's balance sheet as a current liability, because the anticipation is that the liability will be satisfied within a year. A reduction in an asset is remunerated by a decline in Accounts Payable and vice versa.
Assuming there is a percentage increase in account payable by 4%, and then the total liabilities will increase by 41179.04 denoting a reduction in total equity by the same amount in order to balance the sheet. A reduction in account payable by 4% will as well increase the total equity by the same amount
H21 other current liabilities
A corporation's trace of payments for debt requirement similar to a case would be dividend payouts. A decrease in this means an increase in profit. A 4% increase will mean an increase by 2339.72 thus a reduction of total equity b the same margin provided all the other figures remain constant.
Income statement
H8 wages expenses
The amount paid to employees for services rendered. As any expenses it is subtracted from the income, therefore if the expense is increased there is a reduction in income and vice versa.
For 4% of this will mean an increase in wages by 14599.83 thus reducing the profit margin by that.
H10 misc expenses
The same assumption employed in H8 can as well be used here. If it is increased by 4%, then the profit margin will drop by 7568.56
