Financial Statements

A liability.

You journalize and post each income or expense individually to its own income/expense account, but use the total of all the income or expense accounts to jounalize/post to the income summary.

what are the importance of cost sheet?

Some components of a spread sheet include the cells and columns. Functions are another important aspect to spread sheets because they allow you to compute.

no cash dr and sales cr

feature of cash flow

YES

1st: Income statement

2nd:Owner's equity statement

3rd:Balance sheet

4th:Statement of cash flows

A T account is the method used to visualize the debit credit accounting procedure. The T account can represent any account regardless of expense, revenue, asset or liability. The debits are placed the left side and the credits on the right. But these days T accounting is converting I shape for vertical forms of different accounts .

The following is an excerpt from SFAS 131, paragraphs 25 through 35, "Disclosures about Segments of an Enterprise and Related Information". The statement can be read in it's entirety at www.fasb.org : 25. An enterprise shall disclose the following for each period for which an income statement is presented: a. General information as described in paragraph 26 b. Information about reported segment profit or loss, including certain revenues and expenses included in reported segment profit or loss, segment assets, and the basis of measurement, as described in paragraphs 27-31 c. Reconciliations of the totals of segment revenues, reported profit or loss, assets, and other significant items to corresponding enterprise amounts as described in paragraph 32 d. Interim period information as described in paragraph 33. However, reconciliations of balance sheet amounts for reportable segments to consolidated balance sheet amounts are required only for each year for which a balance sheet is presented. Previously reported information for prior periods shall be restated as described in paragraphs 34 and 35. General information 26. An enterprise shall disclose the following general information: a. Factors used to identify the enterprise's reportable segments, including the basis of organization (for example, whether management has chosen to organize the enterprise around differences in products and services, geographic areas, regulatory environments, or a combination of factors and whether operating segments have been aggregated) b. Types of products and services from which each reportable segment derives its revenues. Information about profit or loss and assets 27. An enterprise shall report a measure of profit or loss and total assets for each reportable segment. An enterprise also shall disclose the following about each reportable segment if the specified amounts (a) are included in the measure of segment profit or loss reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss: a. Revenues from external customers b. Revenues from transactions with other operating segments of the same enterprise c. Interest revenue d. Interest expense e. Depreciation, depletion, and amortization expense f. Unusual items as described in paragraph 26 of APB Opinion No. 30, Reporting the Results ofOperations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions g. Equity in the net income of investees accounted for by the equity method h. Income tax expense or benefit i. Extraordinary items j. Significant noncash items other than depreciation, depletion, and amortization expense. An enterprise shall report interest revenue separately from interest expense for each reportable segment unless a majority of the segment's revenues are from interest and the chief operating decision maker relies primarily on net interest revenue to assess the performance of the segment and make decisions about resources to be allocated to the segment. In that situation, an enterprise may report that segment's interest revenue net of its interest expense and disclose that it has done so. 28. An enterprise shall disclose the following about each reportable segment if the specified amounts (a) are included in the determination of segment assets reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in the determination of segment assets: a. The amount of investment in equity method investees b. Total expenditures for additions to long-lived assets other than financial instruments, long-term customer relationships of a financial institution, mortgage and other servicing rights, deferred policy acquisition costs, and deferred tax assets. Disclosures about Segments of an Enterprise FAS131and Related Information FAS131-7 Measurement29. The amount of each segment item reported shall be the measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segment and assessing its performance. Adjustments and eliminations made in preparing an enterprise's general-purpose financial statements and allocations of revenues, expenses, and gains or losses shall be included in determining reported segment profit or loss only if they are included in the measure of the segment's profit or loss that is used by the chief operating decision maker. Similarly, only those assets that are included in the measure of the segment's assets that is used by the chief operating decision maker shall be reported for that segment. If amounts are allocated to reported segment profit or loss or assets, those amounts shall be allocated on a reasonable basis. 30. If the chief operating decision maker uses only one measure of a segment's profit or loss and only one measure of a segment's assets in assessing segment performance and deciding how to allocate resources, segment profit or loss and assets shall be reported at those measures. If the chief operating decision maker uses more than one measure of a segment's profit or loss and more than one measure of a segment's assets, the reported measures shall be those that management believes are determined in accordance with the measurement principles most consistent with those used in measuring the corresponding amounts in the enterprise's consolidated financial statements. 31. An enterprise shall provide an explanation of the measurements of segment profit or loss and segment assets for each reportable segment.At a minimum, an enterprise shall disclose the following: a. The basis of accounting for any transactions between reportable segments. b. The nature of any differences between the measurements of the reportable segments' profits or losses and the enterprise's consolidated income before income taxes, extraordinary items, and discontinued operations (if not apparent from the reconciliations described in paragraph 32). Those differences could include accounting policies and policies for allocation of centrally incurred costs that are necessary for an understanding of the reported segment information. c. The nature of any differences between the measurements of the reportable segments' assets and the enterprise's consolidated assets (if not apparent from the reconciliations described in paragraph 32). Those differences could include accounting policies and policies for allocation of jointly used assets that are necessary for an understanding of the reported segment information. d. The nature of any changes from prior periods in the measurement methods used to determine reported segment profit or loss and the effect, if any, of those changes on the measure of segment profit or loss. e. The nature and effect of any asymmetrical allocations to segments. For example, an enterprise might allocate depreciation expense to a segment without allocating the related depreciable assets to that segment. Reconciliations 32. An enterprise shall provide reconciliations of all of the following: a. The total of the reportable segments' revenues to the enterprise's consolidated revenues. b. The total of the reportable segments' measures of profit or loss to the enterprise's consolidated income before income taxes, extraordinary items, and discontinued operations. However, if an enterprise allocates items such as income taxes and extraordinary items to segments, the enterprise may choose to reconcile the total of the segments' measures of profit or loss to consolidated income after those items. c. The total of the reportable segments' assets to the enterprise's consolidated assets. d. The total of the reportable segments' amounts for every other significant item of information disclosed to the corresponding consolidated amount. For example, an enterprise may choose to disclose liabilities for its reportable segments, in which case the enterprise would reconcile the total of reportable segments' liabilities for each segment to the enterprise's consolidated liabilities if the segment liabilities are significant. All significant reconciling items shall be separately identified and described. For example, the amount of each significant adjustment to reconcile accounting methods used in determining segment profit or loss 1a−1b[These footnotes have been deleted because the effective date of FASB Statement No. 154, Accounting Changes and Error Corrections, has passed.] FAS131 FASB Statement of Standards FAS131-8 to the enterprise's consolidated amounts shall be separately identified and described. Interim period information 33. An enterprise shall disclose the following about each reportable segment in condensed financial statements of interim periods: a. Revenues from external customers b. Intersegment revenues c. Ameasure of segment profit or loss d. Total assets for which there has been a material change from the amount disclosed in the last annual report e. A description of differences from the last annual report in the basis of segmentation or in the basis of measurement of segment profit or loss f. A reconciliation of the total of the reportable segments' measures of profit or loss to the enterprise's consolidated income before income taxes, extraordinary items, and discontinued operations. However, if an enterprise allocates items such as income taxes and extraordinary items to segments, the enterprise may choose to reconcile the total of the segments' measures of profit or loss to consolidated income after those items. Significant reconciling items shall be separately identified and described in that reconciliation. Restatement of previously reported information 34. If an enterprise changes the structure of its internal organization in a manner that causes the composition of its reportable segments to change, the corresponding information for earlier periods, including interim periods, shall be restated unless it is impracticable to do so. Accordingly, an enterprise shall restate those individual items of disclosure that it can practicably restate but need not restate those individual items, if any, that it cannot practicably restate. Following a change in the composition of its reportable segments, an enterprise shall disclose whether it has restated the corresponding items of segment information for earlier periods. 35. If an enterprise has changed the structure of its internal organization in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods, including interim periods, is not restated to reflect the change, the enterprise shall disclose in the year in which the change occurs segment information for the current period under both the old basis and the new basis of segmentation unless it is impracticable to do so. The following is an excerpt from SFAS 131, paragraphs 25 through 35, "Disclosures about Segments of an Enterprise and Related Information". The statement can be read in it's entirety at www.fasb.org : 25. An enterprise shall disclose the following for each period for which an income statement is presented: a. General information as described in paragraph 26 b. Information about reported segment profit or loss, including certain revenues and expenses included in reported segment profit or loss, segment assets, and the basis of measurement, as described in paragraphs 27-31 c. Reconciliations of the totals of segment revenues, reported profit or loss, assets, and other significant items to corresponding enterprise amounts as described in paragraph 32 d. Interim period information as described in paragraph 33. However, reconciliations of balance sheet amounts for reportable segments to consolidated balance sheet amounts are required only for each year for which a balance sheet is presented. Previously reported information for prior periods shall be restated as described in paragraphs 34 and 35. General information 26. An enterprise shall disclose the following general information: a. Factors used to identify the enterprise's reportable segments, including the basis of organization (for example, whether management has chosen to organize the enterprise around differences in products and services, geographic areas, regulatory environments, or a combination of factors and whether operating segments have been aggregated) b. Types of products and services from which each reportable segment derives its revenues. Information about profit or loss and assets 27. An enterprise shall report a measure of profit or loss and total assets for each reportable segment. An enterprise also shall disclose the following about each reportable segment if the specified amounts (a) are included in the measure of segment profit or loss reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss: a. Revenues from external customers b. Revenues from transactions with other operating segments of the same enterprise c. Interest revenue d. Interest expense e. Depreciation, depletion, and amortization expense f. Unusual items as described in paragraph 26 of APB Opinion No. 30, Reporting the Results ofOperations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions g. Equity in the net income of investees accounted for by the equity method h. Income tax expense or benefit i. Extraordinary items j. Significant noncash items other than depreciation, depletion, and amortization expense. An enterprise shall report interest revenue separately from interest expense for each reportable segment unless a majority of the segment's revenues are from interest and the chief operating decision maker relies primarily on net interest revenue to assess the performance of the segment and make decisions about resources to be allocated to the segment. In that situation, an enterprise may report that segment's interest revenue net of its interest expense and disclose that it has done so. 28. An enterprise shall disclose the following about each reportable segment if the specified amounts (a) are included in the determination of segment assets reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in the determination of segment assets: a. The amount of investment in equity method investees b. Total expenditures for additions to long-lived assets other than financial instruments, long-term customer relationships of a financial institution, mortgage and other servicing rights, deferred policy acquisition costs, and deferred tax assets. Disclosures about Segments of an Enterprise FAS131and Related Information FAS131-7 Measurement29. The amount of each segment item reported shall be the measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segment and assessing its performance. Adjustments and eliminations made in preparing an enterprise's general-purpose financial statements and allocations of revenues, expenses, and gains or losses shall be included in determining reported segment profit or loss only if they are included in the measure of the segment's profit or loss that is used by the chief operating decision maker. Similarly, only those assets that are included in the measure of the segment's assets that is used by the chief operating decision maker shall be reported for that segment. If amounts are allocated to reported segment profit or loss or assets, those amounts shall be allocated on a reasonable basis. 30. If the chief operating decision maker uses only one measure of a segment's profit or loss and only one measure of a segment's assets in assessing segment performance and deciding how to allocate resources, segment profit or loss and assets shall be reported at those measures. If the chief operating decision maker uses more than one measure of a segment's profit or loss and more than one measure of a segment's assets, the reported measures shall be those that management believes are determined in accordance with the measurement principles most consistent with those used in measuring the corresponding amounts in the enterprise's consolidated financial statements. 31. An enterprise shall provide an explanation of the measurements of segment profit or loss and segment assets for each reportable segment.At a minimum, an enterprise shall disclose the following: a. The basis of accounting for any transactions between reportable segments. b. The nature of any differences between the measurements of the reportable segments' profits or losses and the enterprise's consolidated income before income taxes, extraordinary items, and discontinued operations (if not apparent from the reconciliations described in paragraph 32). Those differences could include accounting policies and policies for allocation of centrally incurred costs that are necessary for an understanding of the reported segment information. c. The nature of any differences between the measurements of the reportable segments' assets and the enterprise's consolidated assets (if not apparent from the reconciliations described in paragraph 32). Those differences could include accounting policies and policies for allocation of jointly used assets that are necessary for an understanding of the reported segment information. d. The nature of any changes from prior periods in the measurement methods used to determine reported segment profit or loss and the effect, if any, of those changes on the measure of segment profit or loss. e. The nature and effect of any asymmetrical allocations to segments. For example, an enterprise might allocate depreciation expense to a segment without allocating the related depreciable assets to that segment. Reconciliations 32. An enterprise shall provide reconciliations of all of the following: a. The total of the reportable segments' revenues to the enterprise's consolidated revenues. b. The total of the reportable segments' measures of profit or loss to the enterprise's consolidated income before income taxes, extraordinary items, and discontinued operations. However, if an enterprise allocates items such as income taxes and extraordinary items to segments, the enterprise may choose to reconcile the total of the segments' measures of profit or loss to consolidated income after those items. c. The total of the reportable segments' assets to the enterprise's consolidated assets. d. The total of the reportable segments' amounts for every other significant item of information disclosed to the corresponding consolidated amount. For example, an enterprise may choose to disclose liabilities for its reportable segments, in which case the enterprise would reconcile the total of reportable segments' liabilities for each segment to the enterprise's consolidated liabilities if the segment liabilities are significant. All significant reconciling items shall be separately identified and described. For example, the amount of each significant adjustment to reconcile accounting methods used in determining segment profit or loss 1a−1b[These footnotes have been deleted because the effective date of FASB Statement No. 154, Accounting Changes and Error Corrections, has passed.] FAS131 FASB Statement of Standards FAS131-8 to the enterprise's consolidated amounts shall be separately identified and described. Interim period information 33. An enterprise shall disclose the following about each reportable segment in condensed financial statements of interim periods: a. Revenues from external customers b. Intersegment revenues c. Ameasure of segment profit or loss d. Total assets for which there has been a material change from the amount disclosed in the last annual report e. A description of differences from the last annual report in the basis of segmentation or in the basis of measurement of segment profit or loss f. A reconciliation of the total of the reportable segments' measures of profit or loss to the enterprise's consolidated income before income taxes, extraordinary items, and discontinued operations. However, if an enterprise allocates items such as income taxes and extraordinary items to segments, the enterprise may choose to reconcile the total of the segments' measures of profit or loss to consolidated income after those items. Significant reconciling items shall be separately identified and described in that reconciliation. Restatement of previously reported information 34. If an enterprise changes the structure of its internal organization in a manner that causes the composition of its reportable segments to change, the corresponding information for earlier periods, including interim periods, shall be restated unless it is impracticable to do so. Accordingly, an enterprise shall restate those individual items of disclosure that it can practicably restate but need not restate those individual items, if any, that it cannot practicably restate. Following a change in the composition of its reportable segments, an enterprise shall disclose whether it has restated the corresponding items of segment information for earlier periods. 35. If an enterprise has changed the structure of its internal organization in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods, including interim periods, is not restated to reflect the change, the enterprise shall disclose in the year in which the change occurs segment information for the current period under both the old basis and the new basis of segmentation unless it is impracticable to do so. The following is an excerpt from SFAS 131, paragraphs 25 through 35, "Disclosures about Segments of an Enterprise and Related Information". The statement can be read in it's entirety at www.fasb.org : 25. An enterprise shall disclose the following for each period for which an income statement is presented: a. General information as described in paragraph 26 b. Information about reported segment profit or loss, including certain revenues and expenses included in reported segment profit or loss, segment assets, and the basis of measurement, as described in paragraphs 27-31 c. Reconciliations of the totals of segment revenues, reported profit or loss, assets, and other significant items to corresponding enterprise amounts as described in paragraph 32 d. Interim period information as described in paragraph 33. However, reconciliations of balance sheet amounts for reportable segments to consolidated balance sheet amounts are required only for each year for which a balance sheet is presented. Previously reported information for prior periods shall be restated as described in paragraphs 34 and 35. General information 26. An enterprise shall disclose the following general information: a. Factors used to identify the enterprise's reportable segments, including the basis of organization (for example, whether management has chosen to organize the enterprise around differences in products and services, geographic areas, regulatory environments, or a combination of factors and whether operating segments have been aggregated) b. Types of products and services from which each reportable segment derives its revenues. Information about profit or loss and assets 27. An enterprise shall report a measure of profit or loss and total assets for each reportable segment. An enterprise also shall disclose the following about each reportable segment if the specified amounts (a) are included in the measure of segment profit or loss reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss: a. Revenues from external customers b. Revenues from transactions with other operating segments of the same enterprise c. Interest revenue d. Interest expense e. Depreciation, depletion, and amortization expense f. Unusual items as described in paragraph 26 of APB Opinion No. 30, Reporting the Results ofOperations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions g. Equity in the net income of investees accounted for by the equity method h. Income tax expense or benefit i. Extraordinary items j. Significant noncash items other than depreciation, depletion, and amortization expense. An enterprise shall report interest revenue separately from interest expense for each reportable segment unless a majority of the segment's revenues are from interest and the chief operating decision maker relies primarily on net interest revenue to assess the performance of the segment and make decisions about resources to be allocated to the segment. In that situation, an enterprise may report that segment's interest revenue net of its interest expense and disclose that it has done so. 28. An enterprise shall disclose the following about each reportable segment if the specified amounts (a) are included in the determination of segment assets reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in the determination of segment assets: a. The amount of investment in equity method investees b. Total expenditures for additions to long-lived assets other than financial instruments, long-term customer relationships of a financial institution, mortgage and other servicing rights, deferred policy acquisition costs, and deferred tax assets. Disclosures about Segments of an Enterprise FAS131and Related Information FAS131-7 Measurement29. The amount of each segment item reported shall be the measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segment and assessing its performance. Adjustments and eliminations made in preparing an enterprise's general-purpose financial statements and allocations of revenues, expenses, and gains or losses shall be included in determining reported segment profit or loss only if they are included in the measure of the segment's profit or loss that is used by the chief operating decision maker. Similarly, only those assets that are included in the measure of the segment's assets that is used by the chief operating decision maker shall be reported for that segment. If amounts are allocated to reported segment profit or loss or assets, those amounts shall be allocated on a reasonable basis. 30. If the chief operating decision maker uses only one measure of a segment's profit or loss and only one measure of a segment's assets in assessing segment performance and deciding how to allocate resources, segment profit or loss and assets shall be reported at those measures. If the chief operating decision maker uses more than one measure of a segment's profit or loss and more than one measure of a segment's assets, the reported measures shall be those that management believes are determined in accordance with the measurement principles most consistent with those used in measuring the corresponding amounts in the enterprise's consolidated financial statements. 31. An enterprise shall provide an explanation of the measurements of segment profit or loss and segment assets for each reportable segment.At a minimum, an enterprise shall disclose the following: a. The basis of accounting for any transactions between reportable segments. b. The nature of any differences between the measurements of the reportable segments' profits or losses and the enterprise's consolidated income before income taxes, extraordinary items, and discontinued operations (if not apparent from the reconciliations described in paragraph 32). Those differences could include accounting policies and policies for allocation of centrally incurred costs that are necessary for an understanding of the reported segment information. c. The nature of any differences between the measurements of the reportable segments' assets and the enterprise's consolidated assets (if not apparent from the reconciliations described in paragraph 32). Those differences could include accounting policies and policies for allocation of jointly used assets that are necessary for an understanding of the reported segment information. d. The nature of any changes from prior periods in the measurement methods used to determine reported segment profit or loss and the effect, if any, of those changes on the measure of segment profit or loss. e. The nature and effect of any asymmetrical allocations to segments. For example, an enterprise might allocate depreciation expense to a segment without allocating the related depreciable assets to that segment. Reconciliations 32. An enterprise shall provide reconciliations of all of the following: a. The total of the reportable segments' revenues to the enterprise's consolidated revenues. b. The total of the reportable segments' measures of profit or loss to the enterprise's consolidated income before income taxes, extraordinary items, and discontinued operations. However, if an enterprise allocates items such as income taxes and extraordinary items to segments, the enterprise may choose to reconcile the total of the segments' measures of profit or loss to consolidated income after those items. c. The total of the reportable segments' assets to the enterprise's consolidated assets. d. The total of the reportable segments' amounts for every other significant item of information disclosed to the corresponding consolidated amount. For example, an enterprise may choose to disclose liabilities for its reportable segments, in which case the enterprise would reconcile the total of reportable segments' liabilities for each segment to the enterprise's consolidated liabilities if the segment liabilities are significant. All significant reconciling items shall be separately identified and described. For example, the amount of each significant adjustment to reconcile accounting methods used in determining segment profit or loss 1a−1b[These footnotes have been deleted because the effective date of FASB Statement No. 154, Accounting Changes and Error Corrections, has passed.] FAS131 FASB Statement of Standards FAS131-8 to the enterprise's consolidated amounts shall be separately identified and described. Interim period information 33. An enterprise shall disclose the following about each reportable segment in condensed financial statements of interim periods: a. Revenues from external customers b. Intersegment revenues c. Ameasure of segment profit or loss d. Total assets for which there has been a material change from the amount disclosed in the last annual report e. A description of differences from the last annual report in the basis of segmentation or in the basis of measurement of segment profit or loss f. A reconciliation of the total of the reportable segments' measures of profit or loss to the enterprise's consolidated income before income taxes, extraordinary items, and discontinued operations. However, if an enterprise allocates items such as income taxes and extraordinary items to segments, the enterprise may choose to reconcile the total of the segments' measures of profit or loss to consolidated income after those items. Significant reconciling items shall be separately identified and described in that reconciliation. Restatement of previously reported information 34. If an enterprise changes the structure of its internal organization in a manner that causes the composition of its reportable segments to change, the corresponding information for earlier periods, including interim periods, shall be restated unless it is impracticable to do so. Accordingly, an enterprise shall restate those individual items of disclosure that it can practicably restate but need not restate those individual items, if any, that it cannot practicably restate. Following a change in the composition of its reportable segments, an enterprise shall disclose whether it has restated the corresponding items of segment information for earlier periods. 35. If an enterprise has changed the structure of its internal organization in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods, including interim periods, is not restated to reflect the change, the enterprise shall disclose in the year in which the change occurs segment information for the current period under both the old basis and the new basis of segmentation unless it is impracticable to do so.

Yes you will have intercompany entries as they are separate legal entities

Gross revenue is the total sales/income from the primary business activity. Gross profit is Net Sales minus Cost of Goods Sold. Look at a multiple-step income statement for clarification.

Revenues = Sales

Revenue is the amount of money charged for the usual product or services sold by a business.

Balance Sheet

One disadvantage of using national income is that it is often difficult to tell between final goods and intermediate goods. Another disadvantage is problems with double counting.

The purpose of the chart of accounts is so that the correct account is used within the accounting system of a business. Certain businesses may have different names for cash, capital, and other accounts.

The difference between double account system and double entry systems are noted below:

1. Double account system is necessary only for Govt. service rendering org. but double entry system is applicable for all types of org.

2. In double account system balance sheet is divided into two part ie; Capital Account, and general balance sheet but in double entry system only one balance sheet is prepared.

A risk base internal audit is latest approach to ensure best practices aiming at maximizing the impact of audit by focusing on the major strategy ,regulatory, financial and operation risk that confront an organization while internal audit is traditional independent examination of financial and operation of an organization to ensure economic,effective and efficiency utilization of an organizations resources

1 Relevance

2 Reliability

3 Comparability

4 Understandability

Finalization of accounts is to prepare financial reports along with comparision and brefing of company's financial reports include (Income Statement, Cash flows, Balance Sheet, Statement Chages in Equity, Policies and disclousers) .

Limitations of historical cost accounting include :

• Depreciation charged on historically costed assets is only an arbitrary amount based on out-of-date values and estimated useful economic lives.

• Depreciation charges do not take into account actual replacement cost of assets at current prices.

• Profit will not reflect the actual 'costs' of trading, which include the replacement of assets at some point in time.

• By not accounting for inflation, there is no assurance that the entity is maintaining its capital base.

• Overstating profits by undercharging depreciation based on historical cost, and charging cost of sales at historical cost of inventories (and not current cost) can lead to the depletion of an entity's capital through high tas charges and distributions.

• While historical cost accounting provides a consistent basis for entities to prepare accounts, inflation affects different products and markets, and hence entities, to different degree.

• Historical cost accounting makes it difficult for shareholders and analysis to assess the real performance and abiliry of mamagement because changes to current market conditions are not accounted for in the historical valuation basis.

• The true valuation of entities is difficult to assess under historical cost rules.

• Interpretation of accounts over a period of time is difficult because each year relates to different purchasing powers.

• Key ratios (such as return on total assets) are inflated under historical rules because profit is overstated (as outlined...

Deferred tax assets is a companies asset that may reduce their income tax expenses. These can arise from net loss carryovers and can be applied to future fiscal periods.

you should meet Mr Jose at Sunderlan University to get answer for this question