Financial Statements

What are the argue for and against historical cost as a principle of accounting in the preparation of final account of a sole trader?

hat is a Fund?

Fund

Meaning

Money that is set aside for a particular purpose.

To provide money for paying off the interest or principal of (a debt).

To finance, using long-term debt or Capital.

Synonyms

Finance

Support

Back

Furnish

Fund = Capital

We use the phrase "We need additional funds" to mean we need additional capital whether be it for acquiring assets, clearing liabilities or for meeting expenses.

This indicates that Fund means Capital.

All capital of the organisation whether owned or loaned is capable of being called Fund.

Fund is Capital freely available for use

A Fund by its nature would be capital kept aside with a purpose. The fund should be capable of being used for the specified purpose at any time.

Fund, in the topic Funds Flow Analysis, is a general purpose fund. It represents capital resource that would be available to the organisation for general purposes. It would be capable of being used in any manner the organisation prefers without any restriction/hindrance.

Fund is Capital supported by Current Assets

Every rupee of a liability/capital is supported by a rupee of an asset. Every rupee of an asset is financed by a rupee of a liability.

Consider a new business that has been started with a capital of Rs. 2,00,000 brought in cash. The organisation's Balance Sheet immediately after this first transaction would be:

Balance Sheet of M/s ___ as on 31st December __

Liabilities Amount Assets Amount

Capital 2,00,000 Cash 2,00,000

2,00,000 2,00,000

Liabilities supported by Assets : Capital is supported by cash

Assets financed by Liabilities : Cash is financed by Capital

The next day, Furniture worth Rs. 1,00,000 and Stock Worth Rs. 50,000 have been bought for cash. The Balance Sheet after these transaction would be :

Balance Sheet of M/s ___ as on 31st December __

Liabilities Amount Assets Amount

Capital 2,00,000 Cash

Furniture

Stock 50,000

1,00,000

50,000

2,00,000 2,00,000

Liabilities supported by Assets : Capital is supported by Cash, Furniture and Stock

Assets financed by Liabilities : Cash, Furniture and Stock are financed by Capital

Capital/Cash is employed in purchasing Assets

Since Cash used in purchasing Furniture was financed by Capital, we can say that Furniture is financed by Capital. Whereby, we say that capital is employed in purchasing furniture.

On converting an asset into a new one, the liability that was being supported by the replaced asset would now be supported by the new asset. Therefore, on employing capital, the assets supporting capital change.

Capital that can be employed

To be able to employ capital for any purpose, the asset that is supporting it should be easily convertible.

Fund is Capital supported by easily convertible Assets

Fund is capital freely available for being used in any which way the organisation intends i.e. for long term or short term needs. To enable such usage, funds (capital that we call funds) should be supported not just by assets which are convertible but by assets that are easily convertible.

Current Assets are easily convertible

Current

Meaning

Belonging to the present time.

Not overdue; occurring this period.

Synonyms

Present

Existing

Recent

In Progress

Current Assets are assets that are capable of being liquidated in a time span of a year or less. They represent easily convertible assets.

Fund is capital supported by easily convertible assets

+ Current Assets are easily convertible assets.

? Fund is capital supported by Current Assets

Funds exclude Current Liabilities

Current Liabilities

Current liabilities are liabilities that are to be repaid/cleared within the near future (a short period of time). Current liabilities are considered to be supported by current assets as they are similar in nature i.e. both of them have a short life span (a year or less). Current liabilities have a charge on current assets.

Fund is capital that is freely available for use for any purpose the organisation intends without any hindrance/restriction.

All the capital that is supported by current assets cannot be said to be freely available for use without any hindrance. We do not consider Current liabilities to be representing capital that is freely available for use, since they are to be repaid within a short time span

Therefore, capital supported by current assets excluding current liabilities would only be considered as fund.

Fund = Current Assets - Current Liabilities

Fund is freely available capital

+ Fund is capital supported by Current Assets

+ Fund is capital supported by current assets excluding current liabilities

[Current assets in excess of those supporting current liabilities support funds.]

? Funds = Current Assets - Current Liabilities

Fund = Working Capital

Excess of Current Assets over Current Liabilities is Working Capital

? Working Capital = Current Assets - Current Liabilities.

? Fund = Working Capital

What is Funds Flow?

Flow

Meaning

To move or run smoothly with unbroken continuity like in the case of a fluid.

Something that resembles a flowing stream in moving continuously

Synonyms

Stream

Gush

Course

Funds Flow

Fund being working capital, Funds flow indicates the flow of working capital between two points of time. It involves information relating to the various transformations undergone by working capital (i.e. the changes that have taken place in working capital) during the period involved between the two points of time.

Every change in working capital is associated with (or is on account of) a flow either an inflow or an outflow. Thus, funds flow involves information relating to the inflows and outflows that resulted in a change in working capital between the two points of time.

When do we say that there is a flow of fund?

Fund (Working Capital) in an Organisation is like water in a reservoir. The Fund is analogous to water and the reservoir to the organisation.

There is a change whenever there is a flow

There would be a change in fund (working capital) whenever there is a flow (in/out) of fund.

An inflow would result in an increase and

An outflow would result in a decrease.

There is a flow whenever there is a change

A change in fund (working capital) in the organisation is an indication of flow of fund.

An increase would indicate an inflow and

A decrease would indicate an outflow.

Hidden/Masked flows

When there is an inflow followed by an outflow of the same magnitude, there may not be a change in fund (working capital). An inflow would result in an increase in fund which would be set off by an outflow resulting in a decrease. Since the magnitude is the same, after the two transactions, the fund seems to be unchanged.

In such situations, to notice the change, we will have to break down the transactions into two instead of viewing them in total.

50%

How do you reported unearned janitorial revenue in the financial statements

Withdrawal are charged to drawing account and drawing account is contra account of capital account so withdrawal are deducted from capital account.

[Debit] Salaries Expenses 2000

[Credit]Cash/Bank 2000

it does things that you lazy idiot wont think of doing u just got fraped

profit & loss appropriation accounts are prepared after profits. Basic purpose is to show how the profits are distributed.NOT only profits but also concerned losses.

Yes repair and maintenance expenses are part o administration expensive because administration is responsible for take care of and maintenance of all assets in business and administration department has the authority over these repairs and maintenance expenses that's why it is part of Admin expenses.

The maximum percentage of net spendable income that should be set aside for housing is 38 percent. It is important to choose housing that you will be able to afford to pay for each month.

yes

Timely and accurate.

hi

600000

GSA on the financial statement means "General, Selling, and Administrative" expenses. These are the expenses associated with the actual market operations of the firm (i.e., generating revenue, getting product out the door, dealing with suppliers, responding to customers, paying the bills, etc.). Some activities not directly related market operations (e.g., research and development) may be excluded and reported as a separate expense.

I'm not an expert, am also looking for more answer about this. What I know so far is that Clean Surplus Accounting is an idea that tries to eliminate the discrepencies in the reporting of owner's equity and earnings due to different reporting practices by different companies. In essence, it should results in truly comparable equity value for a company.

Depreciation refers to the reduction in value of an item after some time. On the other hand, depletion is the exhaustion of materials that might not have a way of renewal.

There are many questions that a review should answer. One of the important ones is what the work was about and was the author able to accurately portray it in their writing?

[Debit] Cash account

[Credit] bank account

There are quite a few measures of internal control for fixed assets. Insurance coverage for asset exposure, correct depreciation calculated and applied after each period, tax reports filed for each jurisdiction, and approval process for Capital Expenditures.

Land is show in balance sheet under long term assets as it is usable by business for more than one fiscal year.

A company changes accounting principle.

Yes increase in accounts receivable creates cash outflow or reduction in cash as if instead of credit sales it would be cash sales then there would be cash received which increases the cash.