Financial Statements

Gross Profit

Comparative financial statements compares one set of financial statement with another set of financial statements while consolidated financial statement is prepared where in company there is parent and child company relationship exists to join the financial statements of parent and child company as a single financial statements.

There is no "Profit and loss account". There is a profit and loss statement, the income statement. The income statement is closed out to Retained Earnings (shown on the balance sheet), so I guess you might consider that Profit and Loss account. Retained earnings shows the resulting effect of how the company has done over a period of time. If the retained earnings value is positve, then you've been having more profitable years than loss years. If the retained earnings is negative, then you;ve had more losses that profits.

Sales salaries and commission expenses, if paid for selling the products then it is selling expenses, while if salaries or commission is paid for administration work then it would be classified as administration expense like salary of operation manager etc.

Accrued income tax (Income Tax Payable) is a current liability. When the tax is actually paid it is reported on the income statement as Income Tax Expense.

Variance analysis shows the deviation of an organization's financial performance from the set standard in the budget. An organization will promptly address the deviations.

Land is not subject to depreciation because value of land doesnot depreciate rather appreciate and nobody knows the exact disposal time of land.

Employees can also be potential investors and they may need the financial statements in order to decide whether or not it would be prudent to invest in the company. Also if they need to negotiate wages, they can use the financial statements to prove that the company can afford to increase their wages. It also helps employees to see the stability of the company (for example if the company is going to sink, they will be able to pre-empt the fact that they might not be around for much longer and be able to start looking for jobs elsewhere)

Balance sheet is always maintained as most liquid asset at the top, so as the cash is the most liquid asset of business that;s why it is shown right at the top before all other less liquid assets.

They Don't go on the balance sheet unless they are currently earned but owed at a later date. When paid out at the time they are earned they would be assigned to the Income & Expense statement as an expense to "sales commission's Expenses". The only time they would show up on the balance sheet if they were earned but not yet paid out then they would be credited to the accounts payable column in current liabilities as maybe "sales commisions owing" against a debit to the expense account ......... expense account - sales commissions $xxxx Dr - liability account - Sales Commissions owing $xxx Cr

I would classify them as administrative unless the cost of the line is directly related to sales such as the phones in a busy order dept, an outside sales rep's cell phone, or the lines in a telemarketing boiler room.

Accounts Receivable are invoices for work completed and billed out that have not been paid by your customer.

Consolidated cash flow statement shows the cash inflows and outflows of parent company together with all subsidiaries of that parent company at one place to show the complete picture of business.

To calculate net profit for a venture (such as a company, division, or project), subtract all costs, including a fair share of total corporate overheads, from the gross revenues or turnover.

Net profit ($) = Sales revenue ($) - Total costs ($). This is the simplest definition of profit. Another common way of counting profit is EBITDA (Earnings Before Interest Taxes, Depreciation and Amortization). This measure of profit is valuable for two reasons. It effectively isolates operating profits and it offers investors and analysts the ability to compare the performance of business with disimilar capitalization and tax structures.

Commonly, financial statements consist of the BALANCE SHEET, INCOME STATEMENT, STATEMENT OF STOCKHOLDERS EQUITY and the CASH FLOW STATEMENT. Different industries and businesses have different names for some of the statements and add to, or use combination of, the forms above. The not-for-profit industry, for example, generally calls the balance sheet the STATEMENT OF FINANCIAL POSITION and the income statement the STATEMENT OF ACTIVITIES.

In business and analytical circles, the document containing the auditors report, the collection of applicable statements, and the accompanying notes are collectively referred to as the financial statements.

-APMc

Indirect Expenses are those expenses which are incurred after the manufacturing process is over, e.g. selling and distribution expenses, all the administrative expenses, carraige outward, advertisement expenses because they are related indirectlt with the product manufacturing and sales.

Well salaries payable is liability of an organization . This is a current liabilities so they are posted in capital and liability side of a balance sheet.

Detail information of how cost of goods sold is calculated is provided in multi step income statement while it is not provided in single step statement.

True

Operating cash flows shows the overall cash inflows and outflows which initiate completely due to operating activities of business like receipts from debtors or payment to creditors etc.

Land is an asset and fixed or long term asset of business and all assets and liabilities are part of balance sheet and not part of income statement so land is shown under long term assets in balance sheet.

Prepaid rent is that amount which is paid in advance but benefit of which is not yet taken by business so it is current asset of business and like all current assets it is also shown under asset side of balance sheet and not in income statement.

When you pay back a loan or mortgage, part of each payment is interest, the rest is principal. For the interest part you would have Interest Expense, for the principal part something like Mortgage Expense.

A company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first, and typically in order of liquidity. Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities.

Another way to look at the same equation is that assets equals liabilities plus owner's equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing."

Because of the asset and liabilities are presented in the company balance sheet, it can help the manager to make decision whether the company should make further investment or not. As we know, this financial statement details your assets, liabilities and equity, as of a particular date. Although a balance sheet can coincide with any date, it is usually prepared at the end of a reporting period, such as a month, quarter, or year. So, by having a good management of balance sheet, can easy to make the decision whether they should to invest more for the company by looking on the previous investment made by the company.

Firstly Current Assets in a balance sheet are technically "Assets that will provide a future economic benefit" to the company within a period of one financial period (a financial year in Australia - from July 1 to June 30...financial year in USA is different).

Now generally speaking an 'Investment Property' has all the hallmarks of a Long Term Investment, and therefore should be categorized as a Long Term Asset. Why?

Well the whole purpose of an investment property is to provide benefits from two sources...

Firstly renting the property out, you the owner (or company) will gain assessable income by way of RENT.....

Secondly assuming capital growth etc, when you Sell or Dispose of the Asset (property) you will realise a capital gain....the increase in capital growth accumulated over the life of the property....which is always the Market Value, over and above the purchase price.

So back to your question, if it really is an investment property held for the benefit of capital growth, then it would not be a current asset, rather a Long Term Invesment....

(You will also note that a category of the balance sheet in Fixed Asset (Long Term) is Plant Property & Equipment - PPE)

Now heres an interesting point.

Ask yourself are you in the business of Investing or are you (or the company) in the business of trading? ie Buying and Selling Properties?

If you are the latter, ie trader, it may be that you or your company may build, renovate, and 'sell' properties...

In other words you or your company earns 'Income' (here in AUS its called revenue or income according to ordinary concepts) by building and selling properties....

...as such ALL properties owned are INVENTORY.....in which case it would likely therefore to be categorised as CURRENT ASSETS...? why because INVENTORY or STOCK is a category of Current Assets.

...Inventory are like products or items in a shop or Retailer....they earn 'income' by retailing or selling items in their shop..

..So back to the main point, if you feel your company earns income by building, and selling properties, and if it therefore falls under inventory, then Y'ES those properties will be current assets, for that purpose.

...But should a property or properties be kept for over ONE year or more, then it really is an investment and thus fall under Long Term Assets (long term investment)....

Hope that helps