Revive Marketing - Cash position and Profit Analysis

Executive summary

Overall Revive Marketing is doing well based on the performance on its income statement, and a positive profit has been recognised. However, its cash position does not show any sign of improvement. This report discusses the reasons of this issue in two aspects, the nature of the profit figure in income statement and the accounting method has been applied in recording.

Findings can be summarized as:

- Relationship between profit and cash positions

- Pros and Cons in using accrued accounting method

Recommendations mainly focus on the delay of software update, avoid ethical problems and regularly record and review the accounting documents in order to better monitoring the performance.

Table of Contents

Executive summary 2

1. Introduction 4

2. Discussion 5

2.1 Profit in Income Statement 5

2.2 Accrual accounting 5

3. Conclusion 6

4. Recommendations 6

References 7

1. Introduction

This report briefly introduces the current financial position of Revive Marketing, and discusses the reasons behind these financial data.

The main issue discussed in this report is why an improvement of profit has been noticed during the accounting period while cash position has not been increased.

This report contains information that is calculated under accrual accounting principle. Because all transactions are recorded at the time when they are made rather than when actual money has been made or received, there is a likelihood that transactions are shown on one accounting period but actual change has not be made it, and it may deliver biased information about the company’s true financial position.

2. Discussion

2.1 Profit in Income Statement

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...ally is increased. Alan should consider hire a part time accountant and separate the duties, letting one accountant handle cash and letting the other one record all the documents.

Although preparing accounting documents less frequently could reduce the cost of accounting, it also provides weaker information about the financial position of the company. Therefore, change the accounting period into quarterly is not recommended.

References

Haber, Jeffry R (2004). Accounting demystified. AMACOM Div American Mgmt Assn. p. 91.

Helfert, Erich A. (2001). "The Nature of Financial Statements: The Income Statement". Financial Analysis - Tools and Techniques - A Guide for Managers. McGraw-Hill. p. 40.

Limitations of Accrual Accounting by Julie Davoren, Demand Media, http://smallbusiness.chron.com/limitations-accrual-accounting-61462.html, Retrieved 4th may, 2014.