Financial Statements

profits More specifically, profits that are not distributed to shareholders as dividends are maintained in the retained earnings section of the equity section of the balance sheet. For tax purposes, since dividends are after tax on the company and then taxed again on receipt by the sghareholder, the company must show a compelling business reason to keep them instead of distributing them. This is generally not too difficult to do.

The balance of a bank loan is a liability item on a balance sheet (or net worth statement). The principal and interest payments used to repay the bank loan are cash outflows (debt expenses) on a cash flow statement.

Dividends are reported on the income statement?

Amortization is not entered separately but just shown as a deduction from the respective asset(patent) in balance sheet. However it is shown separately in P&L A/c. Its treatment is similar to that of depreciation.

This is for any operational asset

Debits

New asset(fair value)

Accumulated depreciation(account balance of old asset)

Boot(cash received if any)

Loss(if any)

Credits

Old asset (Account balance, NOT BV)

Cash paid(if any)

Gain(if any)

The purpose of Fund Accounting is separation of records. This is done by use of categories (titles). The primary four categories of funds are the, Current Unrestricted Fund, Current Restricted Fund, restricted Endowment Fund, and the Fixed Asset Fund. These Funds may be "titled" by different names. As an example, the Current Unrestricted Fund may be called the General Fund or Current Fund. These titles are given to the fund based upon stipulations such as Board-designated or donor restricted.

Income statement shows the use of assets and liabilities over a certain accounting period. The cash flow on the other hand explains inflow and outflow of cash, and reports the cash in hand, also reflected in the balance sheet. Each financial statement provides certain information regarding the financial condition, and together, they give a complete picture.

Capital expenditure includes costs incurred on the acquisition of a fixed asset and any subsequent expenditure that increases the earning capacity of an existing fixed asset.

Where as, Revenue expenditure incurred on fixed assets include costs that are aimed at 'maintaining' rather than enhancing the earning capacity of the assets. These are costs that are incurred on a regular basis and the benefit from these costs is obtained over a relatively short period of time.

Which of the following accounts will be closed to the Capital account at the end of the fiscal year?

Assuming we're using the cash-flows (Cf) and the required return rate (r) to calculate the Net Present Value (NPV), We need to follow the Rule of Consistency, which is to say, if our (r) is stated in real terms, we must use Real (Cf), and vice versa. Helpful formulas: To adjust Real (Cf) to Nominal, we compound it (n) periods, using the rate of inflation (inf), viz: (Cf-real) * (1+inf)^(n) Similarly, to adjust Nominal (Cf) to Real, we discount it viz: (Cf-nominal) / (1+inf)^(n) The Fisher Theorem illustrates the relation between real and nominal rates, viz: (1+r-nom) = (1+r-real) * (1+inf)

as per accounting standards issued by icai depreciation can be charged by following two methods 1)straight line method 2)written down value method

but as per income tax act depreciation is allowed by way of wdv method.

Accounts Receivable is an asset since it is a resource controlled by the entity as a result of past transaction with the future economic benefit to flow to the entity.

25 % on sales means 1/4 th of sales

n gross profit on cost will be 1/3 .

investors,state

It is everyone! But more so, people who would like to make an informed decision (In terms of purchasing shares). Hence through the use of financial statements, managed by accounting standards and external government bodies they can ascertain whether a company is making a loss/profit etc and whether they should invest in the company or not. In short to protect members and manage public interest.

Depreciation is an operating expense but does not involve any cash flow.

like salaries,rent insurance etc it is included in the P/L accounts.It is considered as operating because machinery/equipments or any property diminishes its value day by day.

In accounting, depreciation is an allocation of a previous expenditure, while in economics depreciation represents a decline in current value.

Net income = Net sales - Expenses. So, we need to figure out what the expenses were for the period you are interested in. Now, expenses for a period is a temporary account under Equity just like revenue (net sales).

Net sales increase equity while expenses decrease equity. So, net income for a period will be the change in equity during that period.

Assets - Liabilities - Owners Equity = Net Income

The accounting equation: Assets = Liabilities + Equity can be rewritten to be

Assets - Liabilities = Equity In this equation, Equity refers to Total Equity which is Owners Equity plus Net Income.

You don't need the net sales figure for this question

NO; The Balance Sheet is prepare after the statement of owners Equity and income statement. The balance sheet used this other two statements. The Income statment needs to be preapred before Owners Equity because the earnings will affect old the others poperation.

These statements are both wrong. From what it says in my Financial Accounting book right in front of me, the income statement is prepared first, not the statement of owners equity. In the statement of owners equity, or the statement of retained earnings, net income, calculated from the income statement, is needed to be added to the beginning retained earnings to get the ending retained earnings. Dividends can also then be subtracted from that number to arrive at the final balance of retained earnings for that period. This ending balance is then presented on the balance sheet under Total Stockholder's Equity as Retained Earnings.

The most common ones are Revenue (income) and Expenses.

These accounts are closed out (because they are temporary) and affect the Net Income which in turn affects Retained Earnings, which is listed on the Balance Sheet. To try and explain "why" is because temporary accounts are used to figure either Net Profit or Net loss. They are closed out leaving them with a balance of $0. At the end of the period in which we choose (usually monthly for income) we We close out our expense accounts in order to figure our monthly Net Profit or Loss.

Revenue and Expenses affect only our Income Statement and our Statement of Retained Earnings.

Current assets and property plant and equipment

Contingent liabilities are liabilities that might be incurred and the outcome is uncertain. They are recorded when the future events are probable to happen and the amount can be estimated reasonably. They include obligations related to product warranties. A contingency is an existing situation where there is uncertainty about possible loss or gain that will not be resolved in the near future.

It's now called "Statement of Income and Expenditure" according to the newly introduced IFRS.