Preparation of Financial Statements

Ten months ago, Tom Smith, a friend of yours from college, founded Smith Sales Company, and the business is doing quite well. Tom comes to you for advice. He needs to prepare financial statements to present to a bank for an expansion loan. His bookkeeper has recorded entries in a general journal and posted the entries to T-accounts in the ledger. However, the bookkeeper does not know how to prepare financial statements. Tom does not know what financial statements are and what they are supposed to report. He has asked for your help in preparing financial statements for the bank.

Requirements:

A. 1. Prepare for Tom a critical analysis of the financial statements that need to be prepared.

2. Include in your analysis the financial statements that need to be prepared, the stakeholders involved, and the informational needs of the stakeholders.