email Hello to my favorite accountant! Thank you for agreeing to meet with me tomorrow. I have provided some information for you below that should help get you up to speed for our meeting.

I started my woodworking business a few years ago to make some money on the side. I make many things $$ drumsticks, baseball bats, and cutting boards, just to name a few.

The reason for me reaching out to you is that I currently have one employee who has been handling my accounting in$-$house, but unexpectedly, he has informed me that he won$$t be able to continue. I pay him $$500$ each month $($$$250$ every other Friday$).$ I opened a bank account at PNC bank in the name of the business. When a customer places an order, my employee collects payment up front to cover the cost for materials for the project. He deposits the cash into the PNC account and writes checks for the material. He records all activity in my QuickBooks Online file. I have about a $2-$week turnaround before I can get the final product to the customer. I do all my work in my workshop that I purchased at the beginning of this year for $$10,000.$ I$$ve paid off around $$1,100$ on it already!

I have attached my Income Statement and Balance sheet from the most recent quarter. Again, they were prepared by my employee, and he says that we use $$accrual basis accounting$$ whatever that means! Anyways, I collected $$12,500$ from customers this quarter, so why is the Income Statement only showing Sales of $$7,000?$ The Balance Sheet doesn$$t seem right to me either. My September $30$ bank statement shows $$2,750,$ so shouldn$$t that be the amount shown on the Balance Sheet for Cash $$ not $$1,500?$ As a side note, I would have expected my bank account to really be growing since I have taken on so much business lately, but I guess there are just a lot of costs that go into running a business! Also, I only bought one workshop, so why is the Balance Sheet showing two different Note Payable amounts? Lastly, as I mentioned, I bought the workshop at the beginning of the year, not this quarter, so why did my employee put it on this quarter$$s Balance Sheet?

I$$m looking forward to our meeting tomorrow so I can gain a better understanding of my financials, and I hope you$$ll tell me everything looks good with these statements.Jordan's Woodworking

Income Statement

For the Quarter Ended September $30,2023$

Sales $7,000$

Cost of Goods Sold $1,600$

Gross Profit $5,400$

Operating Expenses:

Advertising Expense $-$ Facebook $150$

Advertising Expense $-$ Radio $450$

Wages Expense $1,500$

Accounting Expense $1,500$

Depreciation Expense $275$

Insurance Expense $90$

Interest Expense $225$

Supplies Expense $300$

Total Operating Expenses $4,490$

Net Income $($Loss$)910$Jordan's Woodworking

Balance Sheet

September $30,2023$

Assets

Current Assets

PNC Checking $1,500$

Miscellaneous Checking $20,000$

Accounts Receivable $2,500$

Prepaid Insurance $90$

Workshop Supplies $1,750$

Total Current Assets $25,840$

Property, Plant, and Equipment

Workshop $10,000$

Accumulated Depreciation $-$ Workshop $(2,400)$

Wood Lathe $7,000$

Accumulated Depreciation $-$ Wood Lathe $(850)$

Total Property, Plant, and Equipment $13,750$

Total Assets $39,590$

Liabilities and Stockholders' Equity

Current Liabilities

Accounts Payable $4,000$

Unearned Revenue $7,500$

Notes Payable ST $-$ Workshop $990$

Total Current Liabilities $12,490$

Long$-$Term Liabilities

Notes Payable LT $-$ Workshop $7,900$

Total Long$-$Term Liabilities $7,900$

Total Liabilities $20,390$

Stockholders' Equity

Common Stock $15,000$

Retained Earnings $4,200$

Total Stockholders' Equity $19,200$

Total Liabilities and Stockholders' Equity $39,590$ Talking Points:

Address Jordan's question about sales on the Income Statement

Address Jordan's question about cash on the Balance Sheet

Address Jordan's questions about the two liabilities for his workshop on the Balance Sheet

Address Jordan's question about the workshop asset on the Balance Sheet

Do you see any red flags in this scenario? Hint: I see $1$ in the email, $1$ on the Income Statement, and $1$ on the Balance Sheet