Sue Williams is an artist who creates drawings that are purchased by individuals. She displays her drawings at various art fairs, where she has obtained many orders. She has also received many referrals from her previous customers, and her business continues to grow. Sue maintains her own financial records, which include a separate checking account for the business and two notebooks.
In one notebook, Sue records her sales. When she sells a drawing to a customer, Sue records the date, amount, customer name, and a brief description of the drawing. In the second notebook, Sue enters similar information for each purchase of art supplies that she makes. She is planning to meet with her accountant and is not sure if she has all the accounting data regarding the transactions of her business.
Questions
1. If Sue wants to assess her firm's performance, what type of firms should she use for purposes of comparison?
2. Explain how the two notebooks that Sue uses could be used to develop an income statement.
3. Sue notices that her asset turnover is low. Interpret this situation.