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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
First you need to find the break even sales.
Break even sales = fixed expenses/ CM ratio
Break even sales = 3600/.24 = 15,000
Then find the margin of safety dollars.
margin of safety dollars = budgeted sales - break even sales
margin of satefy dollars = 200,000 - 15,000 = 185,000
Then you can find the margin of safety percent
Margin of safety percent = margin of safety dollars/ budgeted sales dollars
margin of safey percent = 185,000/200,000 = 92.5%
How do you standardize balance sheets and income statements and why is standardization useful?
By using international accounting standards for preparing of financial statement will standardize them and standardization has benefit that it helps every body to read the financial statements and anybody can easily compare with each other and done analysis as well.
Which account below is not a subdivision of retained earnings?
There are no accounts listed. Therefore, it is hard to determine which account is not a subdivision of retained earnings. Expenses are not a subdivision of retained earnings.
Why are income statement accounts closed but balance sheet accounts are not?
Income statements refer to a period of time, Balance sheets refer to a point in time.
For things such as revenue and expenses (which are reported on an income statement) last years revenue and expenses have no bearing on the current periods figures. i.e. once you have reported your income for all your activities in a period, the accounts must be wiped clean so you can begin accounting figures for the new period.
A balance sheet is like a snapshot of a business's assets and liabilities, and the accounts must be carried over to a new period. i.e., if you have a warehouse full of books ready to be sold on December 31st, they will still be there on January 1st, therefore the account must remain open.
What is the advantages of exit price accounting?
it is relevant and reliable information. The information is useful to the users. The reality is the use of exit price accounting involves references to real world example. For example, depreciation is a decline in the market price of non current asset. There is no depreciation when there is increase in price or no changes in value of the non current asset.
Why do business managers prefer stable earnings trends?
Reduces the likelyhood of reporting low earnings
Updating accrual accounting records prior to preparing financial statements is called?
closing process
Why high turn over result in low profit margin?
Profit margin is the difference between revenues and expenses. High turn-over causes a decrease in profit margins for many reasons.
The more turnover a company has, the more time and money they must invest (spend, which = and expense) in hiring and training new employees. Whether recruiting employees is done in-house, or outsourced, i.e. through a head-hunting agency, it is a costly component of doing business.
The higher up the position needing filled is to the organization, i.e. Management, CEO, etc, the more costly the expense.
In the U.S., the cost of recruiting a white collar professional, is typically about 20-30% of the salary for the position being filled.
There is also a learning curve associated with hiring new people. They won't be as productive as tenured people whom they may be replacing, as such, when productivity drops, the company spend more time and money trying to offset this drop either by having other employees pick up the slack, which may mean more they need to pay more labor dollars because employees are working longer hours.
High turn-over can also be an indication of low morale. Low morale can also lead to lower productivity, lower productivity results in increased expenses, which helps to result in a lower profit margin.
Pro-Forma financial statements are forecasted statements where the issuer tries to predict levels of operations and the resulting income or loss. The users are usually specific people / banks, etc that want to know what the issuer's goals are to see if they want to commit to engage in a transaction now, based on circumstances that the issuer is predicting. IE: If bank lends a business money on to expand or build a new facility will the increase in production generate enough income to service the debt. Pro-Forma statements will let the bank assess whether the business is realistic in it's goals and assumptions, and whether the business will eb able to afford the new loan.
Should quarterly financial statement be audited?
In the US, there is no law requiring that quarterly financial statements be audited.
Financial statement audits are extremely expensive and time-consuming, so there should be some compelling reason for a company to have its financial statements audited.
For the typical US company, the expense of having its financial statements audited is probably not worth any benefit it might receive as a result of the audit, and for US nonpubliccompanies, audits are not required by law. An outsider such as a bank might want to see audited financial statements from a prospective borrower, but even then, audits are so expensive that this would be relatively rare. The company might need another loan just to pay for the audit!
However, publicly owned companies (companies that sell shares of stock to the general public), howver, are required by law to have an annual audit of their financial statements by an independent CPA. This is to help protect the public.
However, not even publicly owned companies are required to have their quarterly financial statements audited. Only their annual financial statements must be audited.
Although public companies must submit quarterly financial report information to the SEC, the first three quarters' financial statements need only be "reviewed" by an independent CPA. A review involves limited testing procedures that are much less in-depth and time-consuming (and expensive) than audit procedures, and this permits the company to submit its financial information to the SEC on a timely basis. However, the fourth quarter report submitted by a public company must include audited financial statements for the entire year.
The book value of an asset is the same as market value of the asset?
Book value of an asset is the value which is shown in books of accounts while market value of asset is the value which is currently same asset is selling in market so both of these values are not same but it can be same but normally they are not same.
Which part of balance sheet is Work in Process WIP recorded?
That would be just under stock in current assets.
The full disclosure principle requires that the notes to the financial statements report a change in accounting method for inventory.
Disadvantge for not maintaining a fixed asset register?
No proper record for you assets available, therefor you would not be able to estimate the value of your assets and company.
When are income statement and balance sheets usually prepared?
They're prepared after the financial year end. For large companies and corporations on stock markets they have 6 months to prepare them. While smaller companies tend to have longer, in the UK it is currently 10 months, soon to be just 9 months.
Where does supplies go in the income statement?
Supplies inventory is a part of balance sheet asset side while when those supplies used then those are supplies expenses which shows in income statement in profit and loss section.
Net Trading Assets = Accounts Recievable + Inventory - Accounts Payable
An unfunded pension liability is reported on the balance sheet as?
current liability or long-term
liability, depending upon when the pension liability is to be paid
