Case Study 2 - Accounting
Case Study 2 - Accounting
Case Study 2 - Accounting
Journal Entries
T-Tables
Closing Entries
Income Summary
Trial Balance
Financial Statements
V. Conclusion and Recommendations
Save-Mart has a lot more merchandise inventory and accounts receivable as compared to their
cash. Their greater inventory may mean that they are preparing to stock up their supply for a high
demand season. This could also indicate a lack of demand as compared to supply. Their greater
accounts receivable as compared to cash can mean that they receive more payments through account
rather than cash. This may be problematic due to their money not being guaranteed until they actually
receive the cash from the due accounts.
Save-Mart’s large Cost of Goods Sold is an indicator of Save-Mart’s retail business model.
Retail businesses require inventory to be sold which amounts to lare costs of good sold, which is
which deducts a lot from the revenue. The retail model leads to low gross margins due to selling
products which they stock up on with inventory.
It is recommended that Save-Mart converts more of its assets into cash. This guarantees them
to get cash returns to gain profit from the business. Stocking up on assets such as accounts receivable
will just delay their due payments and won’t be able to grow their business immediately by using cash
to pay for other necessities. Merchandise inventory is the asset that should be managed most due to
their business relying on selling their products to earn revenues. This can lead to over-stocking of
merchandise without being able to sell them all for revenue. It is recommended that Save-Mart find a
right balance of the amount of merchandise to be bought and kept, and eventually sold.