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Financial Statements
A financial statement is a record of the financial activities of a person or business entity where all related financial information are presented in an orderly manner and can be easily understood.
5,583 Questions
What entry is required in the company's accounts to record outstanding checks?
If the accounting cash account records have been kept correctly, no journal entry should be necessary for outstanding checks. They are already reflected in the book cash balance.
ANY check written against a company's bank account (whether they are outstanding or not at any given date) should be recorded in the accounting records when the check is first issued, NOT when it clears the bank. If that has been done, then the "book" cash balance (not the bank balance) isthe correct cash balance, and no adjustment need be made to the books.
If you are an accountant recording checks written on a client's bank account after the fact (for example, when the client keeps only manual records), use the client's check register to record payments, and find out from the client what happened to checks that are missing from the checkbook where no entry was has been made on the checkbook stub, so that you are sure that all payments have been accounted for in the correct period.
Normally, when a cash account is reconciled against the bank statement, the only journal entries on the books should be for:
1)Items on the bank statement that have not been recorded on the books (for example, expense for bank or credit card processing fees, or interest revenues)
2)Company checks that were properly issued but never recorded on the accounting system, or which were recorded AT THE WRONG amount and cashed for the correct amount.
3) Online debit or credit card payments made by the company that have not been recorded as expense in the books.
Corrections should be made only for those items where the bank is right and the books are wrong.
A bank reconciliation is the way to determine the checks that are still outstanding at the date of the bank statement.
What are the reasons for negative Unrestricted Net Assets?
I assume this is for a non-profit. It usually means that you are using restricted grants (grants given to an organization for a specific purpose), on other, possibly disallowed activities.
Let's say I give you a grant for $100k that can only be used to "help the homeless population in DC". That $100k sits in a category on your Statement of Activities, and within your accounting system, as "restricted net assets". This is technically a liability. If you don't perform that service, you need to repay me, the grantor, my money back!
Let's say now that your organization runs a second program to "aid refugees". Let's say you have not raised any funds to actually implement that program. Now, you do have $100k in the bank from our previous example. Poor financial management would be to use that $100k to launch your "aid refugees" program. Technically, this is not allowed. When the auditors prepare your financial statements, they will say that you spent $100k out of your own pocket (unrestricted net assets) that you didn't have and will show a negative $100k.
Your restricted net assets would remain positive $100k. You accepted my grant to provide services to the homeless and, until you perform that service, you should not have spent my grant $. That you spent money on other activities is a concern, and is why you may be showing a negative amount in unrestricted net assets. Technically, you owe my homeless program $100k and you'd better replace that cash for that specific program or risk losing me as a donor. The problem is you now have $0 cash, so how are you going to implement my program?!
Many nonprofits get into this situation when there is a cashflow problem. Obviously, if you have staff that you need to pay, and the money from your refugee program is not coming in, you technically should lay-off the employees in that program. In reality, however, organizations may not be able to resist the fact that they have $100k in the bank, and will use restricted funds to juggle cash in the short run. If at year end this is not corrected, you will have an ugly financial statement, and that you used this practice will be evident to donors who are financially savvy.
Hope this helps!
Capital expenditure proposals are initially screened by the?
Capital expenditure proposals are initially screened by the
a. board of directors.
b. executive committee.
c. capital budgeting committee.
d. stockholders.
Why is the cash flow statement useful also how do cash equivalent effect the cash flow statement?
The Cash Flow statement is essential because it shows how efficiently the company is spending its money, and where are they making money from. Cash equivalents are assets that can convert into cash within a short period of time. Short term investments (can go into operating, but more so in investing) and accounts receivables (operating) are good examples of cash equivalents because you are expected to receive money within the year. Ideally, you will want to see cash in accounts receivables within 30 days and ST investments within a few months. Neither of these are shown as cash equivalents in the 3 activities Cash equivalents will also be shown when finding the net change of "cash and cash equivalents".
Should a balance sheet and bank state match up perfectly?
No, they normally do not match. This is because the company record transaction they receive remittence advice slips but the clearing time means it could be received after the year end.
The company will do a bank reconciliation to identify what transactions are outstanding and how the balance sheet book figures matches to the bank statements.
A company does not show the reconciliations on it's financial statements but will retain it for their use.
What are differences between assets liabilities capital income and expenses?
Definition of Asset: a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.
Definition of Liabilities: A company's legal debts or obligations that arise during the course of business operations. Liabilities are settled over time through the transfer of economic benefits including money, goods or services.
Definition of capital:
1. Financial assets or the financial value of assets, such as cash.
2. The factories, machinery and equipment owned by a business.
Does a Balance Sheet show a companys true worth?
A Balance Sheet shows a company's Net Book Value which is the Net Worth according to their accounting practices. This is normally not the value of the company. If a company is publicly held, it will have a market value which is the value of all outstanding stock. If the company is privately held, and was offered for sale, the selling price would typically be greater than the Net Worth of the company. The value might be calculated based on projected Sales or Earnings.
A window dressing technique should showcase the window. A very tall window might look better if vertical blinds are used. Curtains layers and valances also look nice for any window. To downplay a very wide window, vertical blinds can work well, also.
What is meant by the term carriage on sales?
Carriage on purchases is an expense incurred when the business delivers goods to their customers and it is not included in the amount of sales.
Identify other account in a transacton when accounts receivable is dereased?
The other account is usually cash.
Transactions are exchanges of things of value. Accounts Receivable is a asset - something of value owned by an entity.
If Accounts Receivable is decreased, that means that the entity received something of value (or other asset - usually cash) in exchange.
The roles of the audit committee is important. They are to monitor the integrity of a businesses financial books. Review responsibilities include risk management, internal audits, to authorize the use of external auditors and implement polices revolving around the use of auditors for concerns of another nature.
In economics and business decision-making, sunk costs are costs that cannot be recovered once they have been incurred. Sunk costs are sometimes contrasted with variable costs, which are the costs that will change due to the proposed course of action, and prospective costs which are costs that will be incurred if an action is taken. In microeconomic theory, only variable costs are relevant to a decision. Economics proposes that a rational actor does not let sunk costs influence one's decisions, because doing so would not be assessing a decision exclusively on its own merits. The decision-maker may make rational decisions according to their own incentives; these incentives may dictate different decisions than would be dictated by efficiency or profitability, and this is considered an incentive problem distinct from a sunk cost problem. In decision making one should also consider fixed proportion of the sunk costs. Lets take an example of a market which has a free entry. There are several firms in the market operating profitably, but if high proprotions of sunk cost in this market are fixed costs then others firms would hesitate to enter into that market while on the other hand if very low proportion of sunk cost are fixed costs for the same market, firms would love to enter into that market.
Accounting treatment for surplus of revaluation of fixed assets?
a revaluation increase is credited to equity as a revaluation surplus, unless it's a reversal of a revaluation decrease, when it should be recognised as income.
How do you treat depreciation in relevant costing?
Depreciation is a sunk cost, so you should ignore it in relevatnt costing. you shoud be asking yourself the following question: can I avoid depreciations once I have bought the asset? You should always ignore deprecition when answering a relevant costing questions. You have already incurred the cost of the asset and as a result you can not avoid deprecition, that is why it is a sunk cost. Peace
Tshepo
Explain the techinques of preparing fund flow statement illustrated with imaginary figures?
(A) cash form operating activities
net profit before tax and extraordinary items:
add: tax made during the year
add: transfer to general reserve
add: dividend paid during the year
adjustments:
- add: depreciation charged during the year
- add: written off fictitious assets
- add: loss on sale of fixed assets
- add: goodwill written off
- add: interest paid
- add: provision (like provision for doubtful debts
- less: gain on sale of fixed assets
- less: interest received
- less: dividend received
operating profit before changing working capital
add: increase in current liabilities
decrease in current assets
less: increase in current assets
decrease in current liabilities
less : tax paid during the year
(net cash from operating activities)
(B) cash from investing activities
add: sales of fixed assets
add: sales of any long term investment
less: purchase of any fixed assets
less: purchase of any long term investment
(net cash from investing activities)
(C) cash form financing activities)
add: issue of share capital
add: issue of debenture
less: payment of preference shares
less: payment of debentures
less: payment of dividend
less: payment of interest
(net cash from financing activities)
A+B+C
add opening balance of cash and cash equivalent
this is final which must match the closing balance of cash and cash equivalent
solution by:
SAM BIDHAN
KAITHAL (HARYANA)136027
Why is the going concern assumption an important consideration in understanding financial statement?
According to Going Concern Assumption it is assumed that the said business will continue in the foreseeable future and will not liquidate in future, This assumption ensures the faith of investors, potential investors, and all the stakeholders in the business. Thus the Financial Statement is prepared on the basis of Going Concern Assumption.
An officer of Carson Company recently commented that when he receives the firm's financial statements. He looks at just the bottom line of the income statement -- the line that shows the net income or net loss for the period. He said that he does not bother with the rest of the income statement because "it's only the bottom line that counts." He also does not read the balance sheet. Do you think this manager is correct in the way he uses the financial statements? Why or why not?
Cash flow statement is the statement which show the cash flow from operating, financing and investing activities.
The accrual basis of accounting requires revenue be recorded when cash is received from customers?
False. Under the accrual basis of accounting, revenue is recorded when earned, not necessarily when cash is received. Revenue is earned when a sale is made, whether the customer pays cash or makes the purchase on account.
