Maria Hernandez & Associates Harvard Case Solution & Analysis


The transaction analysis is done with the completion of her business income statement and balance sheet. Initially there were $50,000 injected to business. Later on, some of the purchases were made and rent payments created as $6000, $3000 for the advance deposit and further $3,000 for July rent. She has also purchased some equipment at the cost of $27,000. Moreover, shepurchases office supplies and Stationary which costs of $5,000. Cash balance remained after making all these purchase were $12,000 which is shown in the excel file as well as in the Appendix 2.

Furthermore, she was confused about how to make an appropriate adjustments. Cash showed a balance of $6,600 instead of $12,000. The reason for this discrepancy is because of the inaccuracy of the head of accounts as some of the purchases were earlier made which have not their asset account.  She has purchased some additional office supplies costing $900 and acquire more equipment’s on cost $11,000. There purchases were partially on cash and part on credit. Additionally she also paid some advance rent expenses for the month of august and September which costs $6,000 and salary expenses including utilities amount $33,000. While making adjustments of these balances cash balance of $6600 remained out. The company should maintain the proper register of cash and account sales because it helps to identify the cash addition to the account of the cash. Maria should also maintain the cash register to develop betterunderstanding of the movement of the cash.

Moreover, the income statement and balance sheet are preparedaccording to the rule of financial accounting, which is very important for the Maria to understand these concepts in preparing the financial. Now the income statement is showing the net revenue of $47,000 which is the joint of cash sales and owed sale that $40,000 and $7000 respectively. Furthermore the operating expense is calculated according to the data given in the case. The date of operating expense are salaries expense $33,000 rent expense $6000, office supplies and stationary expense is $1700 which is the difference of the Actual purchase and purchases on hand. In addition, there is an interest cost factor which is determined through the monthly rate of interest multiplied by loans that is 100 per months. The depreciation is calculated on the basis of straight line method. This analysis is done through the useful period of the equipment which is three years and then equipment cost divide by three it extracts one year depreciation which is $9,000 but they purchase equipment on June 20, 2004. So the monthly depreciation is calculated which is $750 per months, then after it’scome to the net profit which is $5,650. All calculation is done in the excel file which attached with documents file as well as annexed in this report Appendix 1.

The balance sheet includes Assets under the sub category of Current Assets and Non-Current Assets. Current Assets Means that the consumption of assets within a year on the other hand Noncurrent Assets means that the assets consume more than a year. Further moves to second side of balance sheet which Liabilities and Equity Side. Liabilities include two sides, one is Current Liabilities and the second is Non-Current Liabilities. This also contains the same function which is done by Assets but their nature are totally different. Equity means that the total worth of the organization in term of their investments. Refer to the course material current assets are cash, accounts receivables, prepayments of rent and office supplies on the other hand non-current assets contain only the equipment and the values are $6,600, $7,000, $6,000, $4,200 and $38000. One of the approaches of the financial accounting is that depreciation is contra assets, which means it will curtail the assets so in the equipment the accumulated Depreciation is removed by $1,500. Move toward the part of liabilities and equity, the liabilities are Account Payable of Equipment $5,500, Loan 20,000 and equity is $30,000 with the addition of net profit which the actual return on the equity investments.

The suggestion for the Maria Hernandez is that they have to maintain different register for the understanding of the accounts of cash, sales, receivables, expense and further more. It has to prepare each of accounts separately according to the knowledge of accounting. She should develop an accounting system which would bring her to an easy end and will justify the environment cost as well. These are the main recommendations for the entity. Further the decision is in the court of Maria.

Appendix 1


Maria Hernandez & Associates


Income Statement


For the  Month Ended 31 august 2014

  Client Revenue in cash                40,000  
  Client Revenue Remaining                  7,000  
  Net Client Revenue                  47,000  
  Less Operating Expense        
  Salaries expense, utility bills and repair of equipment          (33,000)  
  Rent Expense                  (6,000)  
  Stationary Expense & Office Supplies Expense            (1,700)  
  total Operating Expense              (40,700)  
  Net Operating Profit                    6,300  
  Interest Expense                      (100)  
  Depreciation Expense                    (750)  


This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.

This case is the unemployed designer web page, which is launching a new consulting firm with personal savings and family loans. Two months later, it is a report on the operations of his father, using the financial statements it has to design and build. "Hide
by William J. Bruns Jr. Source: Harvard Business School 2 pages. Publication Date: Aug 03, 2001. Prod. #: 902401-PDF-ENG

Share This


Save Up To




Register now and save up to 30%.