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How do you construct a statement of cash flow from income statements and balance sheets?
Constructing a statement of cash flow from income statements and balance sheet is no simple task and requires training. Most CPAs can do this, but not all. Unless you are a professional finance person or accountant, I suggest you hire an accountant to do this. Additionally, please be aware that financial statements prepared in accordnace with GAAP, usually include a cash flows statement with the income statement and balance sheet.
Does GAAP require a physical inventory Why?
GAAP stands for generally accepted accounting principles, and a physical inventory is needed when using GAAP. One reason it is necessary is, if you don't account for your shrinkage by doing a physical count, your total ending inventory costs will be inflated.
Why is cash a credit in accounting?
Cash is "not" a credit in accounting. The cash account is an asset and is a debit balance account. To increase the cash account you debit the account and to decrease it you credit it.Cash = Current Asset = Debit Balance(GAAP)
Do all US companies have to use GAAP?
Not all U.S. companies are required to use Generally Accepted Accounting Principles (GAAP). Publicly traded companies must adhere to GAAP as mandated by the Securities and Exchange Commission (SEC). However, private companies can choose whether to follow GAAP or an alternative accounting framework, such as the cash basis or tax basis of accounting, depending on their needs and regulatory requirements.
Do ALL companies have to comply with GAAP?
Not all companies are required to comply with Generally Accepted Accounting Principles (GAAP). Publicly traded companies in the United States must follow GAAP as mandated by the Securities and Exchange Commission (SEC). However, private companies have the option to use GAAP or other accounting frameworks, such as the cash basis or tax basis of accounting, depending on their financial reporting needs and regulatory requirements. Additionally, some smaller entities may choose not to adhere to GAAP if they are not seeking external financing or investment.
Is cash flow statement required by GAAP?
Yes Cash flow statement is required by GAAP and IAS (international accounting standards) as well.
How do you construct a statement of cash flow from income statements and balance sheets?
Constructing a statement of cash flow from income statements and balance sheet is no simple task and requires training. Most CPAs can do this, but not all. Unless you are a professional finance person or accountant, I suggest you hire an accountant to do this. Additionally, please be aware that financial statements prepared in accordnace with GAAP, usually include a cash flows statement with the income statement and balance sheet.
When revenue should be recognized on the income statement according to GAAP who is addressed?
business entity assumption
What are the weaknesses of cash flow statements?
Cash Flow statements can have several weaknesses: One weakness is that companies who use the accrual method of accounting will have income statements and cash flow statements that are significantly different. For instance, a company receiving a contract may recognize the revenue on the contract, but may not have received the actual cash associated from the contract. Another weakness is that the United States Generally Accepted Accounting Principles (US GAAP) requires the use of a cash flow statement but allows two methods: the direct and indirect methods. Oddly, US GAAP has also gone to the extent of requiring those that report under the direct method to also report under the indirect method. This provides consistency and comparability in financial statements. Another weakness is that manufacturing companies have overhead expenses to account for, complicating the differences between direct and indirect method reporting. And finally, certain items of the statement of cash flows, particularly non-cash financial transactions like exchanges and other non-cash expense items like depreciation and amortization are very difficult for non-accountants to understand.
What are examples why cash flow from operations is lower than net profit?
The term 'Cash Flow from Operations' can have various meanings. It is one thing if you are talking about a GAAP (Generally Accepted Accounting Principles) prepared Statement of Cashflows. It is another thing if you are talking about projected cash flow from operations available for an owner to take home as personal income. If you are looking for 'net' cashflow from operations (after debt is paid), it will be less than net profit when the reduction for debt payments is greater than add-backs for non-cash items such as depreciation and amortization, and the add-back for interest (which is part of the debt payment). If you are considering GAAP Statement of Cashflows, the cash flow from operations is impacted by changes in working capital as well as the profitable (or not) operations of the company. For example, a major collection on accounts receivable will add to cash flow, but will not increase net profit for that period.
Does GAAP require a physical inventory Why?
GAAP stands for generally accepted accounting principles, and a physical inventory is needed when using GAAP. One reason it is necessary is, if you don't account for your shrinkage by doing a physical count, your total ending inventory costs will be inflated.
Why is cash a credit in accounting?
Cash is "not" a credit in accounting. The cash account is an asset and is a debit balance account. To increase the cash account you debit the account and to decrease it you credit it.Cash = Current Asset = Debit Balance(GAAP)
Do all US companies have to use GAAP?
Not all U.S. companies are required to use Generally Accepted Accounting Principles (GAAP). Publicly traded companies must adhere to GAAP as mandated by the Securities and Exchange Commission (SEC). However, private companies can choose whether to follow GAAP or an alternative accounting framework, such as the cash basis or tax basis of accounting, depending on their needs and regulatory requirements.
Difference between Indian gaap and us gaap?
MAJOR DIFFERENCES: 1. Underlying assumptions: Under Indian GAAP, Financial statements are prepared in accordance with the principle of conservatism which basically means "Anticipate no profits and provide for all possible losses". Under US GAAP conservatism is not considered, if it leads to deliberate and consistent understatements---revenue recognized when earned or when it is realized or realizable. 2. Format/ Presentation of financial statements: Under Indian GAAP, financial statements are prepared in accordance with the presentation requirements of Schedule VI to the Companies Act, 1956. On the other hand , financial statements prepared as per US GAAP are not required to be prepared under any specific format as long as they comply with the disclosure requirements of US GAAP. 3. Cash flow statement: Under Indian GAAP (AS 3) , inclusion of Cash Flow statement in financial statements is mandatory only for companies whose share are listed on recognized stock exchanges and Certain enterprises whose turnover for the accounting period exceeds Rs. 50 crore. Thus , unlisted companies escape the burden of providing cash flow statements as part of their financial statements. On the other hand, US GAAP (SFAS 95) mandates furnishing of cash flow statements for 3 years - current year and 2 immediate preceding years irrespective of whether the company is listed or not . 4. Depreciation: Under the Indian GAAP, depreciation is provided based on rates prescribed by the Companies Act, 1956. US GAAP , depreciation has to be provided over the estimated useful life of the asset, 5. Long term Debts: Under US GAAP , the current portion of long term debt is classified as current liability, whereas under the Indian GAAP, there is no such requirement and hence the interest accrued on such long term debt in not taken as current liability. 6. Consolidation of subsidiary accounts: Under the Indian GAAP, consolidation of accounts of subsidiary companies is not mandatory. Under US GAAP (SFAS 94),Consolidation of results of Subsidiary Companies is mandatory. 7. Investments: Under Indian GAAP (AS 13), Investments are classified as current and long term. Investments are required to be segregated in 3 categories i.e. held to Maturity Security ( Primarily Debt Security) , Trading Security and Available for sales Security and should be further segregated as Current or Non current on Individual basis.
What methods of accounting is revenue recorded ONLY when cash is received?
The Cash Basis Accounting method is the method used to record income (revenue) ONLY when cash is received and expenses ONLY when cash is paid out. Cash Basis Accounting does not conform to the GAAP and is not considered a practical accounting method.
What do the fieldwork standards under GAAP require?
The fieldwork standards address what is required when actually performing the audit work.
Where GAAP is implementing in Pakistan?
gaap
