Brandywine Homecare

Brandywine Homecare, a not-for-profit business, had revenues of $12 million in 2007.  Expenses other than depreciation totaled 75 percent of revenues, which is $9 million, and depreciation expense was $1.5 million. All revenues were collected in cash during the year and all expenses other than depreciation were paid in cash. The Income statement is the one of the three financial statements. The other two are the balance sheet and the statement of the cash flows. Brandywine Homecare’s total profit margin of 12.5 percent shows that the homecare makes 12.5 cents on every dollar of total revenues. If the company doubled its depreciation, both net income and profit margin would be zero. The cash flow will be the same for both cases, which is $3 million. Cash accounting and accrual accounting are two similar methods of maintaining accurate accounting records. Accrual accounting is considered to be the standard accounting practice for most companies. Equity is the ownership claim against total assets. For investor-owned businesses, equity is the amount of owner-supplied financing. Equity for not-for-profit businesses is the amount of capital supplied by the government grants, charitable contributions or other organization.

Within GAAP, suppose the company changed it depreciation calculation procedures

      An income statement is a report that shows how much revenue a company earned over a specific time period (usually for a year or some portion of a year). An income statement also shows the costs and expenses associated with earning that revenue. The bottom line of the statement usually shows the company’s net earnings or losses (www.sec.gov). Brandywine Homecare, a not-for-profit business, had revenues of $12 million in 2007.  Expenses other than depreciation totaled 75 percent of revenues, which is $9 million ($12million multiply by 75/100), and depreciation expense was $1.5 million. Depreciation, one of the expenses categories, means a non-cash change against...