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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
Why creditors would be interested in the balance sheet of a business?
Creditors are interested in balance sheet to check that how much money company has already taken as a loan from other creditors and how much assets are pledged and will company be able to return credit or not.
What is the accounting treatment for IPO costs?
The accounting treatment for transaction costs are as deductible for equity range. Since the IPO is defined as the first issuance of equity. Accounting also treats transactions of cost for IPO as a merger accounting method.
What is the difference between deferred income and accrued Income?
Deferred income (also known as deferred revenue, unearned revenue, or unearned income) is, in accrual accounting, money received for goods or services which have not yet been delivered.
According to the revenue recognition principle, it is recorded as a liability until delivery is made, at which time it is converted into revenue.
For example, a company receives an annual software license fee paid out by a customer upfront on January 1. However the company's fiscal year ends on May 31. So, the company using accrual accounting adds only
Five months worth (5/12) of the fee to its revenues in profit and loss for the fiscal year the fee was received. The rest is added to deferred income (liability) on the balance sheet for that year.
Deferred income shares characteristics with accrued expense with the difference that a liability to be covered later are goods or services received from a counterpart, while cash is to be paid out in a latter period,
When such expense is incurred, the related expense item is recognized, and the same amount is deducted from accrued expenses.
Could Cash flows from assets will always be less than cash lows from financing due to dividends?
False
What is the net income for last year of Microsoft Corporation?
Stock dividend is increased on stockholders equity?
Well stock dividend increases the number of shares but the total value of investment in business remains the same.
Fund flow Statement helps to measure the different sources of funds. Funds Flow Statement analyses the Sources and Application of Funds while others don't.
What is the treatment of Interest on Debentures Accrued but not due in the Co's Balance Sheet?
In the Co's Balance Sheet:
Interest on Debenture Accrued but not due is to be taken under the head Current Liabilities.
Where as Interest on Debenture Accrued and Due is taken under the head Secured Loan.
Financial system is the processes and procedures used by a firm's management to exercise financial control and accountability. These measures include ecording, verification and timely reporting of transactions that affect revenues, expenditures, assets and liabilities.
What is kind of operating expense is depreciation selling expense or general administrative expense?
Examples of operating expense ==> depreciation expense of a machine, impairment of goodwill Example of selling expense ==> advertising Example of general administrative expense ==> office expense
Painting of assets is an asset or expense?
If a custom paint scheme was applied when the asset was new (such as a company vehicle), you would add that painting cost to the capitalized cost of the asset. If the painting was done because the assets had been in use and needed freshening up, it would be considered maintenance expense.
Accrual is a form of record-keeping. Usually, businesses record sales on a cash or accrual basis. Accrual accounting is when sales are recorded when they are made instead of when payment is received.
Why are Accounting Standards necessary?
Accounting standards are necessary to promote high quality financial reporting. The fundamental role of accounting is to communicate economic information about businesses and other organization to various stakeholders including government, investors, shareholders, suppliers, lenders, customers and the general public. These stakeholders use such information to take decisions and to assess the stewardship of people appointed to manage such organizations. If this information is not of a high quality standard, then the stakeholders would be unable to take effective decisions that will benefit them. For example, if a financial report is manipulated to show higher profits, investors would hold on to their shares with the belief that the company is doing well.
Accounting standards came to be developed from the mid sixties onwards to promote the integrity of the accounting profession by way of ensuring uniformity in the way accountants report transactions in their books and also in their preparation of the final accounts of businesses. This is by and large aimed at boosting the confidence of stakeholders, particularly shareholders and potential investors in the accounting profession.
Good and useful information should have the essential characteristics of understandability, comparability, relevance and reliability in order to play its role effectively.
Accounting standards serve to promote the understandability , comparability, relevance and reliability of financial reports.
Which financial statements do not include fixed asset accounts?
Statement of Cash Flows, Income Statement, Statement of Retained Earnings
Those are three that I can think of off the top of my head
What will increase contribution margin?
As one looks at contribution margin (effectively a product's/service's financial contribution to the organization before overheads and other company-based costs), there are two things that can be done for improvement:
* Cutting costs (e.g., reducing costs of production, reducing scrap loss, increasing production efficiency, automation, etc.)
* Increasing sales (e.g., raising prices, increasing demand, expanding market area, etc.)
What are examples of fixed and variable cost in an airline company?
Some of the Variable costs are Fuel Cost, energy, and operating cost
What is the meaning of gross block in a company's balance sheet.?
The total value of acquiring all fixed assets (even though at different points of time) is called 'Gross Block' or 'Gross Fixed Asset'
Are payables accounts used in cash basis accounting?
Cash basis accounting is a method under which cash is immediately paid or received as transection occured and no future payment or receit is recorded that's why there is no use of payable or receivable accounts exists in this accounting method.
How would spreading out your investments reduce the risk of losing all the money you have invested?
This is a prominent investment criterion known as "diversification", where investors are advised to diversify the their investments by putting them in different types of investment pools (e.g. bank deposits, government bonds, corporate bonds, shares, etc) spread out across different business firms, industries, countries and geographical zones, whereby, investments are not expected to fall all at one time.
Importantly, investors need to understand that while diversifying their portfolios they would be forgoing higher returns for lower ones, but positively, this is also seen as exchanging riskier investments for lower ones.
Diversification is seen as the mitigation of unsystematic risk.
What kind of items are posted in the Income statement?
An income statement reports a company's revenue over a period of time. The items posted on the statement are operating and non-operating items including net sales, cost of goods, depreciation, interest, and income taxes.
A standardized accounting system has predictable elements and structure.
A standard system produces financial statements that make it easy (at least possible) to compare results for businesses within the same industry. And, since the structural elements are the same across the board, once you understand the financial elements of the system, it is possible to understand any financial statements for any industry.
What is the disadvantage of the going concern concept?
One of the disadvantages of the going concern concept is that it may not accurately reflect fair market value. A business may not end up having to go out of business and liquidate its assets. The company could pull through and raise enough resources to stay operational.
Positive assurance - An affirmative statement or opinion given by the auditor, generally based on a high level of work performed.
Negative assurance - A statement indicating that, as a result of performing certain procedures, nothing came to the accountant's attention indicating that the subject matter in question did not meet a specified standard.
