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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
Does a credit to accounts payable represent cash paid to creditors?
No actually... Cash paid to credits should credit cash account and debit payable account
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What is Accounting definition of equity?
Equity = Assets -Liabilities
Equity is also referred to as the first loss when earnings are depleted. Equity = Common Stock (at Par) + Paid in capital + Pref. Stock + R/E (NI)
Why GAAP precludes use of variable costing for external financial reports?
GAAP does NOT preclude use of variable costing for external financial reports. The only place the literature addresses this question is in ARB (Accounting Research Bulletin #4) which states that the exclusion of all overhead from inventory is unacceptable. Variable costing does not attempt to exclude overhead associated with the production of product, i.e. variable overhead. But it does exclude the cost of providing productive capacity.
It is odd that in its discussion of the current standard for segment reporting that the FASB said that external users of financial information should received data prepared on a basis consistent with that used by management for decision making. Since it is widely accepted that variable costing is useful to management, can this statement by the FASB be consider an endorsement of variable costing in the financial statements of companies which use it internally?
When do you put the asset on the balance sheet?
An asset is put on the balance sheet to show an identified estate of an enterprise at bookvalue. Examples of assets: cash, buildings and equipment, patents, participations in other companies etc. In general, assets have to be paid for. The liability part of the balance sheet shows the source of funds (equity and/or debt) used to retain the asset.
What are the Needs for accounting standards?
The term standard denotes a discipline, which provides both guidelines and yardsticks for evaluation. As guidelines, accounting standard provides uniform practices and common techniques of accounting. As a general rule, accounting standards are applicable to all corporate enterprises. They are made operative from a date specified in the standard. Accounting is the art of recording transactions in the best manner possible, so as to enable the reader to arrive at judgments/come to conclusions, and in this regard it is utmost necessary that there are set guidelines. These guidelines are generally called accounting policies. The intricacies of accounting policies permitted Companies to alter their accounting principles for their benefit. This made it impossible to make comparisons. In order to avoid the above and to have a harmonised accounting principle, Standards needed to be set by recognised accounting bodies. This paved the way for Accounting Standards to come into existence.
What is the rate of interest incurred on a note payable?
debt during the give This field indicates how much interest expense incurred from debt during the given period. This field contains only interest related costs paid for borrowed amount.period. This field contains only interest related costs paid for borrowed amount.y interest related costs paid for borrowed amount.
Retained cash flow is the cash generated from operation which can be used for reinvestment. So basically it is cash from operation minus all dividend payments.
How Report-form and account-form balance sheets differ?
Presentation form of a balance sheet, which generally follows one of two formats: (1) the traditional form called the account form, which presents assets on the left and liabilities and owner's equity on the right; and (2) the report form, which presents assets above, liabilities and stockholders' equity below. Both types of format are widely used.
What is the difference between contingent liability and off balance sheet liability?
There is no difference between Contingent Liability and Off Balance Sheet Liability.
1. Existence: The assertion on existence is made to check whether the specified assets and liabilities are present at the given date. It is also required to check that the transactions that are recorded took place at the specified date. In order to test these items of the financial statement, it is not sufficient that only books are consulted which record the assets or the liabilities. There should be proof of the existence of the physical assets or liability. For checking existence help is also sought from outside.
2. Completeness: Checking completeness of a financial statement is to analyse whether all the transactions that are already given in the financial statement are rightfully included. In order to abide by the completeness assertion, the auditors prove with the help of sufficient evidence that all the recorded transactions deserve to be included. This is further supported with an external document so as to provide evidence regarding the occurrence of the transaction.
3. Valuation: Valuation basically checks whether the different components of the financial statement have been included in the right proportion. The components are assets, liabilities,expense and revenue. The auditor does this with the help of GAAP.
4. Rights and obligations: This is to check whether the assets that are included in the financial statement are the rights and the liabilities are the obligations of the company. In order to ensure this, sometimes special purpose entities are created.
5. Presentation and Disclosure: This assertion is to ensure whether the items in the financial statements are classified in the right way. It is important to check that the account balance is calculated as well as disclosed properly.
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What difference between proportionate method of consolidation and equity method of consolidation?
If there is a joint venture between two companies. Each of the companies, under the equity method, only records half of the income from the joint venture on the income statement-nothing on balance sheet. With the proportionate consolidation method, the parent companies record half of the liabilities and assets from the joint venture.
What are accounting entries to book deferred tax asset or liability?
For booking first time DTA
entry: DTA A/c DR
TO P&L a/c
For booking first time DTL
entry: P&l a/c DR
To DTL
What is a format of cost statement?
No such statement. You may want to ask about the 'const' type-modifer.
net profit
How would you analyze the financial position of company from the point of view or investor?
please give some ideas about a investor One who lays out money, usually by lending or purchasing, in the expectation of profiting from interest earnings or capital gain.
Difference between fund flow statement and balance sheet?
Difference between fund flow statement and balance sheet?
Funds flow statement and balance sheet both are the statements of different nature. Funds flow statement is a statement summarizing the significant financial changes which occurred between the beginning and the end of a company's accounting period while balance sheet is a statement of assets and liabilities at a particular point of time. Here are some of the important differences between the two:
- Funds flow statement include only those items which causes changes in working capital while balance sheet includes the assets and liabilities of the company and shows total resources of the company.
- Funds flow statement can be used for decision making purpose while balance sheet is used for examining the financial soundness of the company.
- Funds flow statement is prepared for the use of internal management and hence its preparation is not mandatory, while balance sheet is for the use of external parties like creditors, shareholders, government and hence its preparation is mandatory for the company.
- Funds flow statement is prepared after preparation of balance sheet and for a relatively short period of time as compare to balance sheet.
"Hence it can be said that funds flow statement is not a substitute of balance sheet but it is a supplementary statement and hence they should both be used together in order to reach at right conclusion regarding the financial position of the company"
Objectives of Financial Reporting?
-Relevance - Accounting information is relevant if it is capable of making a difference in a decision.
Relevant information has:
(a) Predictive value
(b) Feedback value
(c) Timeliness
- Reliability - Accounting information is reliable to the extent that users can depend on it to represent the economic conditions or events that it purports to represent.
Reliable information has:
(a) Verifiability
(b) Representational faithfulness
(c) Neutrality
2) Secondary qualities of useful accounting information:
Comparability - Accounting information that has been measured and reported in a similar manner for different enterprises is considered comparable.
Consistency - Accounting information is consistent when an entity applies the same accounting treatment to similar accountable events from period to period.
Accounting Qualities and Useful Information for Analysts
Here is how these qualities provide analysts with useful information:
Relevance- Relevant information is crucial in making the correct investment decision.
Reliability - If the information is not reliable, then no investor can rely on it to make an investment decision.
Comparability - Comparability is a pervasive problem in financial analysis even though there have been great strides made over the years to bridge the gap.
Consistency - Accounting changes hinder the comparison of operation results between periods as the accounting used to measure those results differ.
Not sure what your question is, but maybe you're meaning: pro forma balance sheet
What is a revaluation reserve?
a revaluation reserve is an increase in the value of fixed assets.for example,if a building was valued at £900,000 in 2007,and its net book value at that date was only £700,000,the difference of £200,000 is revaluation reserve.if the net book value would have been £950,000, there would be a revaluation deficit of £50,000.
