Electrical service fees ($1,200 + $5,000 + $900) ... $ 7,100

Total revenues from operating activities............... 7,000 Other revenues ................................................ 0 Total revenues .............................................. $ 7,100

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Operating expenses

Rent ............................................................ 1,000

Salaries ........................................................ 1,400

Utilities ......................................................... 540

Total Operating expenses................................. 2,940 Other Expenses 0 Total expenses 2,940

Net income................................................... $ 4,160

Statement of Financial Position Sony Electric

SONY ELECTRIC Statement of Financial Position As at March 31, 2019 $ $ $ Fixed Asset Office Equipment ................................ 2,530 Van ................................................. 13,000 15,530 Current Asset Cash ................................................ 59,180 Account Receivable ............................ 900 Office Supplies .................................. 1,150 61,230 Less Current Liabilities Accounts Payable .............................. 8,550 8,550 Working Capital .................................. 52,680 68,210 Less Long-Term Liabilities ...................... Long-term Liabilities ........................... 0 Net Assets .......................................... 68,210 FINANCED BY Capital Sony Eclectic Capital March 1, 2019 ...... 65,000 Add net income ................................. 4,160 69,160 Less Drawings ................................. 950 Sony Eclectic Capital March 31, 2019... 68,210

Statement of Cash Flows Sony Eclectic

SONY ELECTRIC Statement of Cash FlowsFor Month Ended March 31, 2019

Cash flows from operating activities

Cash received from clients ($1,200 + $5,000) ................ $ 6,200

Cash paid for supplies .................................................... (800)

Cash paid for rent ........................................................... (1,000)

Cash paid to employee ................................................... (1,400)

Cash paid for utilities ...................................................... (540)

Net cash provided by operating activities ....................... $ 2,460

Cash flows from investing activities ..................................

Purchase of equipment .................................................. (2,530)

Purchase of van .............................................................. (4,800)

Net cash used by investing activities ............................... (7,330)

Cash flows from financing activities ....................................

Investments by owner...................................................... 65,000

Withdrawals by owner .................................................... (950) 64,050

Net cash provided by financing activities .......................

Net increase in cash .......................................................... $ 59,180

Cash balance, December 1, 2019 ..................................... 0

Cash balance, December 31, 2019 .................................. $ 59,180

3. Financial Statements: Purpose, Interrelationship, and Decision- Purpose

Purpose

The statement of financial performance. The statement of financial performance (or the income statement) provides a summary of a business' revenue and expenses together with the resultant profit or loss that a business makes over a period of time from operating activities (Wild, Shaw, $ Chiappetta, 2015; Horngren, Sundem, Elliot, & Philbrick, 2014). Thus, it measures the income of a business, which then helps in evaluating performance over time (Horngren et al., 2014).

The statement of financial position. On its part, the statement of financial position (or the balance sheet) indicates the economic status of a business at a given point of time (Horngren et al., 2014). It does this by summarizing a business' the types of assets, liabilities, and owner's equity and their respective amounts at that particular instant in time (Horngren et al., 2014: Wild, Shaw, & Chiappetta, 2015). Assets are financial resources businesses use to "generate future cash inflows or reduce or prevent future cash outflows" while liabilities are "claims against their assets by outsiders" (Horngren et al., 2014, p. 9). On the other hand, owner's equity is the entitlement a person that owns a business has over its assets.

The statement of cash flows. This statement reports and categorizes cash inflows or outflows. Cash outflows (or receipts) is the cash that a business receives from its clients in exchange of goods or services (Wild et al., 2015). On the other hand, cash outflows are the payments in cash the business makes to support its activities (Wild et al., 2015). Thus, the statement of cash flows explains the changes in a company's cash balances over time (Horngren et al., 2014). Because cash is the heartbeat of any business, it helps investors or managers to keep in touch with the health of their business (Horngren et al., 2014).

Interrelationship

The income statement, the balance sheet, and the statement of cash flows are closely related. For example, the income statement helps fills in the gaps between balance sheets (Horngren et al. 2014). Because a balance sheet only shows the financial status of an organization at definite points of time, the income statement explains changes that take place between balance sheets (Horngren et al. 2014). In other words, revenues and expenses affect owners' equity. The income statement thus gives a summary of the impact revenues and expenses have on the owners' equity entry on the statement of financial position (Wil et al., 2015). Additionally, the reconciliation of the cash flows statements uses the balance sheet's cash entry (Wil et al., 2015).

Decision-Making

Financial statements are core to sound decision-making in business. For instance, Kyzera may use the current assets and liabilities entries in the balance sheet to calculate the current ratio (Wild et al., 2015). This ratio shows if an organization can sustainably pay its short-term debts. It thus could help Kyzera when she should defer the payment of due debts with creditors for a payment date extension (Wild et al., 2015). Also, Kyzera can decide on how much money she can withdraw from Sony Electric's accounts by referring to the net income in the income statement (Wild et al., 2015). A prudent decision Kyzera could make is to set the amount she would draw that equals a certain proportion of the net income (Wild et al., 2015).

4. Advantages of a Company or a Partnership over a Sole Proprietorship

The current set-up of Sony Electric as a sole proprietorship prevents the business and its owner from benefiting from advantages that companies or partnerships offer. These advantages include:

Company

A company, or a corporation, is a business organization created under individual states' laws (Horngren, 2014). Corporations' owners have limited liability, which implies that they separate legal entity from their shareholders (Horngren, 2014). Therefore, companies are responsible for their actions (Horngren et al. 2014; Wild et al., 2015). As such, claims against the company are limited to its assets, which protect the owner's personal property, in case the company becomes bankrupt (Horngren et al. 2014; Wild et al., 2015). Another advantage of trading as a company is that companies can easily transfer ownership by selling shares of stock (Horngren et al. 2014). Thus, if Kyzera incorporates Sony Electric, she can raise more capital from hundreds of potential investors (Horngren et al. 2014). Lastly, incorporating Sony Electric would mean it can continue to exist and to do business long after Kyzera die or withdraw as the owner (a sole proprietorship terminates in such circumstances) (Horngren et al. 2014). Overall, companies are better at commerce since they control 90% of business in the US compared to 6% that sole proprietorships do (Horngren et al. 2014).

Partnership

A partnership is an association of two or more persons in a joint-venture to do business as co-owners (Horngren, 2014). They have various advantages over sole proprietorships. For instance, they join different individuals with varied talents together to share the obligation of running a business (Anonymous, 2012). Additionally, just like a corporation, a partnership can raise more capital than sole proprietorship because its partners open their financial resources to it (Anonymous, 2012). Similarly, individual partners may use their connections and personal properties to seek banks' loans (Anonymous, 2012). Last, subject to the partnership agreement, the existence of a partnership can be definite even a member dies or withdraws from it (Anonymous, 2012).

References

Anonymous. (2012). An Introduction to Business: V. 2.0.

Horngren, C. T., Sundem, G. L., Elliott, J. A., & Philbrick, D. (2014). Introduction to financial accounting (11th ed.). New York, NY: Pearson Higher Ed.

Wild, J., Shaw, B., & Chiappetta, K. (2015). Fundamental accounting principles (22nd ed.). New York: McGraw-Hill Education.