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September 16, 2013
In any business, the financial statements are the backbone of the financial accounting reporting within the business. The four financial statements include the income statement, balance sheet, retained earnings statement and the statement of cash flows (Kimmel, Weygandt & Kieso, 2010). These four statements provide a summary picture of the overall financial health of the company, for the period of time reported, to both internal (managers and employees) and external customers (investors and creditors). The internal and external customers can use the company’s reported financial
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($105,000 -105,000/1.25) (21,000)
Plus profit realized in 2012 ($90,000 -90,000/1.25) 18,000
Income realized in transaction with third parties $672,000
Pearce Company's interest (0.8 ( $672,000) 537,600
Controlling interest in consolidated net income $2,337,600
PRUITT CORPORATION AND SUBSIDIARY
Consolidated Statement Workpaper
For the Year Ended December 31, 2013
| |Pruitt | |Sedbrook
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equity accounts as well as increasing income accounts. The “Financial Statements” PhxKlips delineated four financial statements that are used to report all company financial information in standard formats. The four statements are the Income Statement, the Balance Sheet, the Retained Earnings Statement and the Statement of Cash Flow. Together they provide a complete picture of the financial condition of a company. This PhxKlips details how to compile and read each of the four types of statements so that I could make sense out of the information provided on each one. The Income Statement contains the revenue and expenses with the resulting net income or loss for a specific period. The Balance
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CASE – Lake Champlain Sporting Goods Company, a wholesale supply company, engages independent sales agents to market the company’s products throughout New York and Ontario. These agents currently receive a commission of 20% of sales, but they are demanding an increase to 25% of sales made during the year ending December 31, 20X4 budget before learning of the agent’s demand for an increase in commissions.
The budgeted 20x4 income statement is shown below. Assume that cost of goods sold is 100% variable cost.
LAKE CHAMPLAIN SPORTING COMPANY
Budgeted Income Statement
For the Year Ended December 31, 20x4
Cost of good sold 9,000,000
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Research and Application 6-34, page 278
1. From looking at the income statement presented on page 50, is prepared using an absorption format. Then on page 33 it is prepared using a contribution format. The annual report says that the contribution format income statement shown on page 33 is used for internal reporting purposes; but, Benetton has chosen to include it in the annual report anyway. The contribution format income statement treats all cost of sales as variable costs. The selling, general and administrative expenses shown on the absorption income statement have been broken down into variable and fixed components in the contribution format income statement.
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February 8, 2016
There are two costing methods studied in Chapter 19: absorption costing and variable costing. Absorption costing is the standard for use in the generally accepted accounting principles (GAAP) for external reporting (Kimmel, Weygandt, & Kieso, 2011).
Variable or absorption for this company
In the scenario given, absorption costing would be the better option. Products under absorption costing “absorb” all costs, including the fixed costs. As a result, the income statement prepared under absorption costing has a net loss of only $4,956 compared to the variable costing income statement net loss of $41,898. The net loss in either case
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An investor recently purchased a corporate bond that yields 9%. The investor is in the
36% combined federal and state tax bracket. What is the bond’s after-tax yield?
(2-2) Corporate bonds issued by Johnson Corporation currently yield 8%. Municipal bonds of
equal risk currently yield 6%. At what tax rate would an investor be indifferent between
these two bonds?
(2-3) Molteni Motors Inc. recently reported $6 million of net income. Its EBIT was $13 million,
and its tax rate was 40%. What was its interest expense? ( Hint: Write out the headings for
an income statement, and then fill in the known values. Then divide $6 million net
income by 1 − T = 0.6 to find the pre-tax income. The
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Statement of income of the Assessee
Statement of income during the income year ended on .........30th June 2012.........................
| Heads of Income |Amount in taka |
|1. Salaries : u/s 21 (as per schedule 1) |499,200 |
|2. Interest on Securities : u/s 22 |x |
| 3. Income from house property : u/s 24
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either on the balance sheet or the statement of cash flows. Second, please examine the factors that can explain the changes in Cash. The statement of CFs will give you the answer. Note that you do not need to comment on every line there, and please just find the most significant items there)
In 2013, the net income was significantly reduced due to a nonrecurring charge or an increase in other current liabilities which in turn has significantly reduced the net income from 1,383,800 in 2012 to 8300 in 2013; since nonrecurring a one-time charge, therefore, the decrease in net income does not reflect any red flag.
In 2014, net income grew from 8300 to 2,068,100 which is a growth rate of 49.45
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Molteni Motors Inc. recently reported $6 million of net income. Its EBIT was $13 million,
and its tax rate was 40%. What was its interest expense? (Hint: Write out the headings for
an income statement, and then fill in the known values. Then divide $6 million net
income by 1 − T = 0.6 to find the pre-tax income. The difference between EBIT and
taxable income must be the interest expense. Use this procedure to work some of the
reported $6 million of net income
Its EBIT was $13 million
The Talley Corporation had a taxable income of $365,000 from operations after all
operating costs but before (1) interest charges of $50,000, (2) dividends
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. Lastly, the financing activities will have receipts for borrowing money as well as money that has been paid to investors and creditors.
Unlike the direct method, the indirect method is a more accrual based method that does not contain as much information. Instead of preparing statements using receipts and paperwork to start a company will use the income statement to get a starting figure for the net income of the company. Then from the net income the accountants will make adjustments for all noncash items so that the statement goes from an accrual based income statement to a statement that only includes cash related items. This method does not require receipts and paperwork to get to a cash
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"Comparing IFRS to GAAP Paper"
In what ways does the format of a statement of financial or position under IFRS often differ from a balance sheet presented under GAAP?
The United States uses two main accounting systems. We have the GAAP(Generally Accepted Accounting Principles and we also have IFRS(International Financial Reporting Standards). These two accounting systems have differences that make them a bit different from each other. For example GAAP Balance sheets have Income statement, a statement of comprehensive income, changes in equality, a cash flow statement and footnotes. IFRS Balance sheet has an Income statement, Statement of comprehensive income, changes in equality
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Identify the four basic financial statements.
The four basic financial statements a company can produce are the Income Statement, Retained Earnings, Balance Sheet and Statement of Cash Flows. All these statements are prepared for a specific period in time, usually on a monthly, quarterly or annual basis.
Describe the purpose of each of the four financial statements.
The Income Statement summarizes the fees earned, less any operating expenses to show if the company is profitable. The Income Statement uses the matching concept, which means the expenses are matched with the revenue generated in the same time period as the expenses. If the fees earned are greater than the
781 words - 4 pages
June 14, 2012
When people think of business they think of money. Business is not about just money there is a lot more to it. Money is business but what happen when you go deeper into financial statements. Financial statements are a collection of reports about an organization's financial results and condition. Financial statements are useful to determine the balance sheet, income statement sheet, statement of stockholders equity, and cash flow statement. Financial statement helps conclude if the business has the potential to pay back its debts, track financial results as well
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Statement of Cash Flows (Indirect Method)
AAA Company Limited
Statement of Cash Flows for the year ended December 31, 20XX
Cash flows from Operating activities
Net Income / Profit
Adjustment for Non-operating Expenses
Add: Depreciation expenses
Add: Loss on Disposal of assets ( Net Book Value > Sale Proceeds )
Less: Profit on Disposal of assets ( Net Book Value < Sale Proceeds )
Changes in Current Assets and Current Liabilities
(Increase)/Decrease in Account Receivables
(Increase)/Decrease in Inventories
Increase/(Decrease) in Account Payables
Increase/(Decrease) in Accrued Expense
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1. Financial accounting provides economic and financial information for all of the following except
d. other external users.
2. As of June 30, 2013, Actual Tigers Company has assets of $100,000 and stockholders' equity of $30,000. What are the liabilities for Actual Tigers Company as of June 30, 2013?
3. The ending retained earnings amount is shown on
a. the balance sheet only.
b. the retained earnings statement only.
c. both the income statement and the retained earnings statement.
d. both the balance sheet and the retained earnings statement.
4. Black Keys Company began the
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Identifying the Industry Case
Financial Statement Analysis:
Identify the Industry Case
After researching balance sheets, income statements and financial ratios surrounding the industries in discussion, the below traits have been identified for each industry:
* High receivables and payables (loans)
* High Interest expensed
* Little inventory
* High net income
* High equity ratio
* Lots of inventory (especially Finished goods)
* Low gross profit percentage
* Low debt due to risky business
* High Research and Development
* High gross profit
* High liability
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3, we learned the adjusting entries in the end of an accounting period and we also kind like review the content of accounting 221 class. A lot of the materials were covered in accounting 221 class. But we also learned a few new account names such as prepaid insurance, income summary, and so on. And we also learned how to make an income statement given a trial balance and some other information, which is very useful.
In chapter 4, we learned a lot about net income, comprehensive income, other comprehensive income and accumulated comprehensive income. Comprehensive income is the sum of net income and other items that must bypass the income statement because they have not been realized
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outflows, and to provide a supplemental schedule that is the cash flows statement indirect method presentation
• Reconciles the accrual-based net income to operating cash flow by adjusting for noncash transactions (amortization, depreciation…) and computing the differences on a comparative-year basis in current asset and liability accounts. Indirect method is also easier to compute and requires on statement instead of two.
Types of information trade creditors, equity investors and managers expect to obtain from financial statements
• Trade Creditors want to know whether a company pays its bill on time and if they will pay bills promptly in the future. Long term creditors
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CASE 4–33 Cost Structure; Target Profit and Break-Even Analysis [LO4, LO5, LO6] Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a commission of 15% of selling price for all items sold. Barbara Cheney, Pittman's controller, has just prepared the company's budgeted income statement for next year. The statement follows:
As Barbara handed the statement to Karl Vecci, Pittman's president, she commented, “I went ahead and used the agents' 15% commission rate in completing these statements, but we've just learned
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and reports. Financial statements contain summarized information of the organization’s financial affairs, organized systematically. These statements comprise the incomer statements or profit and loss account and the position statement or the balance sheet.
• Income Statement: The profit and loss account sets out income as well as expenses of the same period and after matching the two, the difference being the net profit or net loss, is shown as the difference between the two sides of the account. Thus, the earning capacity and the potential of an organization are reflected by its profit and loss account.
• Position Statement: And also know as Balance sheet. It displays the
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1. Explain why financial statements are important to the decision-making process in financial analysis. Also, identify and discuss some of their limitations for analysis purposes.
2. The preparation and analysis of comparative balance sheets and income statements are commonly applied tools of financial statement analysis and interpretation.
a) Discuss the inherent limitations of analyzing and interpreting financial statements for a single year. Include in your discussion the extent that these limitations are overcome by use of comparative financial statements computed over more than one year.
b) A year-to-year analysis of comparative balance sheets and income
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AICPA AcSEC Practice bullitens.
Category D consists of AICPA Accounting Interpretations, FASB Implementation Guides, and widely recognized and prevalent industry practices.
All of these comprise to make the “House of GAAP” (Kieso, D., Weygandt, J., & Warfield, T., p. 12) that provides hierarchy and guidance for businesses in determining the correct course of action with accounting issues.
Qualities of Effective Accounting Information
The two primary qualities of effective accounting information needed by financial statement users are relevance and reliability. Accounting information is relevant when it assist users in making an informed decision, and has a predictive value on
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11-1 The four financial statements contained in most annual reports are the balance sheet, income statement, statement of retained earnings, and statement of cash flows.
11-2 No, because the $20 million of retained earnings probably would not be held as cash. The retained earnings figure represents the reinvestment of earnings by the firm. Consequently, the $20 million would be an investment in all of the assets of the firm.
11-3 Liquidating assets, borrowing more funds, and issuing stock would constitute sources of funds. Purchasing assets, paying off debt, and stock repurchases would constitute uses of funds. Thus, the following general rules can be used to
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accepted accounting principles (GAAP), sector practices and regulatory standards. Financial reports are "fair" if they are objective and accurate. They are "complete" when all four financial statements are presented. These statements include a balance sheet, a statement of profit and loss, a cash flow statement and a statement of owners' equity.
Test Account Details
• An auditor tests details of accounts in a business entity's financial statements to obtain "sufficient" and "competent evidential matter", and to confirm analytical relationships between accounts or account groups. Evidential matter is proof upon which an auditor bases an opinion. Such evidence is sufficient if an auditor considers it appropriate based on segment activities, and is competent when it meets criteria outlined in audit plans for areas under review. Analytical account relationships could include comparing balance sheet and income statement accounts. For example, customer receivables--a balance sheet account--is related to sales--an income statement account.
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Oracle Microsoft Notes: Comparison between the two companies' ratios
Earning per share As given in the income statement $1.69 $2.73 Cannot compare due to a different amount of shares outstanding.
Current ratio Current assets $39,174 = 2.76 $74,918.00 = 2.60
Current liabilities $14,192 $28,774.00
Gross Profit Ratio Gross profit amount $442 = 1.2% $1,637 = 2.3% Microsoft Sales (13940) - cost of revenue (15,577)
Net Sales $35,622 $69,943 "Oracles Sales(24,031) -Operating Expenses (23,589)
Profit margin ratio Net income $8,457 = 23.7% $23,150 = 33.1
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and ultimately pay higher prices for corporate earning power.
* Increased profit based bonus
* Decrease regulations
* Avoidance of higher taxes
* Higher share prices
* Reduced share price volatility
* Increased corporate valuation
* Lower cost of equity capital
* Increased value of stock options
* Improved credit quality
* Higher debt rating
* Lower borrowing costs
* Less stringent financial covenants
Getting creative with the income statement include steps taken to communicate a different level of earning power using the format of income statement
Expenses and losses can be minimized through an overvaluation of such assets
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reestablish your trauma policy 1 year after a successful claim. Full underwriting process is not necessary.
Product Disclosure Statement shows the lists of medical conditions that are covered under this policy.
Income protection cover
Income protection cover pays you a monthly benefit, just like your salary. It replaces your income if you cannot work due to sickness or injury.
I recommend ‘Agreed Value’ policy to deliver certain benefit for you at claim time. No matter your income decrease or increase, you will receive same benefit.
Income Cover payments will only start when you are unable to work for a period of time. This is called the waiting period. You can choose a waiting period
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from the company's external auditors to top management warning about an unusual use of standard costs at the Home Security Division.
When Ms. Cummins ran across these letters, she asked the assistant controller, Gary Farber, if he knew what was going on at the Home Security Division. Gary said that it was common knowledge in the company that the vice president in charge of the Home Security Division, Preston Lansing, had rigged the standards at his division in order to produce the same quarterly earnings pattern every year. According to company policy, variances are taken directly to the income statement as an adjustment to cost of goods sold.
Favorable variances have the effect of
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or sales not reported on line 1a (see instructions) 1b 4173585 c Total. Add lines 1a and 1b . . . . . . . . . . . 1c d Returns and allowances plus any other adjustments to line 1a (see instructions) . . . . . . . . . . . . . . 1d 4173585 e Subtract line 1d from line 1c . . . . . . . . . . . 1e 2921509 2 Cost of goods sold (attach Form 1125-A) . . . . . . 2 3 Gross profit. Subtract line 2 from line 1e . . . . . . . . . . . . . . . . . 4 Ordinary income (loss) from other partnerships, estates, and trusts (attach statement) . . 5 Net farm profit (loss) (attach Schedule F (Form 1040)) . . . . . . . . . . . . 6 Net gain (loss) from Form 4797, Part II, line 17 (attach Form 4797) . . . . . . . . 7
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, is a clothing company known worldwide for its Levi's brand of denim jeans.
Diesel S.p.A. - an Italian design company. It is best known for luxury, pret-a-porter clothing aimed at the young adult market.
Contact Information: True Religion Apparel
2263 East Vernon Avenue
Vernon, CA 90058
Phone: (323) 266-3072
Fax: (323) 266-8060
Web Site: www.truereligionbrandjeans.com
PERIOD ENDING | 12/2011 | 12/2010 | 12/2009 | |
Income Statement |
Operating Revenue (Revenue/Sales) | 419,798 | 363,714 | 311,001 | |
Total Revenues | 419,798 | 363,714 | 311,001 | |
Cost of Sales | 135,219 | 123,393 | 108,947 | |
Cost of Sales with Depreciation | 147,969
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projected income statement for Hollydazzle presented in Exhibit 2. What other costs should they consider in estimating the profitability of the venture?
On the Hollydazzle.com's Projected Anuual Operating Income (June 1999) it looks low the SG&A expenses. In order to manage this business they should take into consideration increase cost of SG&A, like SG&A expense of FunDays International. In estimating the profitability of the venture they should take into consideration also costs for: site development, advertising, and computers.
2. a). Forecast Hollydazzle’s operation income for the year ended June 30, 2000 if sales grow by 50% over forecast sales for the June 30, 1999 year
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business from one process or industry to another will completely alter the process of recording business transactions. For a company to be considered profitable or successful, the cash flow must be accounted for accurately. The income statement contains noncash expenses and accruals and this is why net income is not an accurate measure of cash flow. This is also the reason for requiring a statement of cash flows and implementing an accrual accounting process, which can identify operating income or losses of the company.
Market Value and Book Value
Another area of interest includes careful consideration of assets required to start the business. To get the most value out of all assets there
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The flexible budget uses the same selling price and cost assumptions as in a original budget. Variable and fixed costs do not change categories. The variable amounts are recalculated using the actual level of activity, which in the case of the income statement is sales units. The important thing to remember in preparing a flexible budget is that if an amount, cost or revenue, was variable when the original budget was prepared, that amount is still variable and will need to be recalculated when preparing a flexible budget. If, however, the cost was identified as a fixed cost, no changes are made in the budgeted amount when the flexible budget is prepared.
It’s important to remember in
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to maintain its performance trajectory, yet they project sustained improvements for Lowe's. Students are invited to scrutinize the analyst's five-year income-statement and asset-side balance-sheet forecast for Home Depot. The case expressly focuses on the asset side of the balance sheet as a preview for other cases using free-cash-flow forecasting. The Home Depot forecast exercise exposes students to the mechanics of financial-statement modeling and sensitivity analysis, which they can use in building their own forecast for Lowe's. Finally, the strong-growth assumptions for Home Depot relative to the modest-growth forecast for the industry suggest that the company can be expected to capture
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– pg. 106
o Generally included in gross income for accrual method for the year received
o But, may defer all or a portion of an advance payment for services if they include advance payments for services in whole or in part in their revenues for a subsequent tax year for financial statement purposes
o See page 106 for examples about the deferral method of advance payments
- Advance receipt of payments for sales of goods – pg. 107
o An accrual method taxpayer can wait to recognize income from advance payments from the sale of goods if it accounts for the sale using the same method for financial and tax accounting purposes
Under this alternative method, an advance payment is included
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and asked him to prepare a report explaining the financial condition of the irm. Table I and 2 present the Income Statement and Balance Sheet for the recent two years.
| 2012 | 2011 |
Net Sales | 2,050,000 | 1,678,894 |
Cost of Goods sold | 1,537,500 | 1,343,115 |
Depreciation | 79,000 | 51,000 |
Selling & Administrative Expenses | 40,000 | 32,945 |
Earnings Before Interest and Taxes | 393,500 | 251,833.8 |
Interest Paid | 155,000 | 44,000 |
Taxable Income | 238,500 | 207,833.8 |
Taxes (40%) | 95,400 | 83,133.52 |
Net Income | 143,100 | 124,700.3 |
Dividends | 42,930 | 37,410.08 |
Addition to Retained Earnings | 100,170 | 87,290.2
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December 31, P278.
c) Rent expired during the year, P9,000.
d) Equipment was purchased on January 1, 2010 with estimated salvage value of P2,900 and 6 years useful life.
e) Unearned Fees at December 31, P2,700.
f) Wages accrued but unpaid at December 31, P438.
Journalize the adjusting entries required at December 31, 2012.
Show computations after each entry if any.
Problem 13 (Weygant, et al, page 165-166)
The adjusted trial balance columns of the worksheet for Quickest Typing are as follows.
QUICKEST TYPING Worksheet (Partial) For the month ended 30 April 2010 |
Account Titles | Adjusted Trial Balance | Income Statement | Balance Sheet |
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CHAPTER 5—BASICS OF ANALYSIS
1. Statements in which all items are expressed only in relative terms (percentages of a base) are termed:
e.|none of the answers are correct|
2. In financial statement analysis, ratios are:
a.|the only type of analysis where industry data are available|
b.|absolute numbers converted to a common base|
c.|fractions usually expressed in percent or times|
d.|the only indication of the financial position of the firm|
e.|none of the answers are correct|
3. Denver Dynamics has net income of $2,000,000. Oakland
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ignoring the obsolescence of inventory.
Improper expenses on 2011’s income statement
The salary expense in 2011 is $29,500, which includes both Rob and Stephen’s annual salaries. Exhibit 1 tells us that Rob’s salary is $28,000(30,000-2,000). So we can calculate Stephen’s annual salary is only $1,500, which is quite unreasonable. There should not be such a huge difference between the two co-founders’ salaries. Therefore, WAG’s salary expense is understated and the net income is overstated.
Salary should not be deducted because the deduction of the salary will lead to higher net income. Rob will get more compensation by 5 times of the net income.
Dividend expense should appear on the
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1. The financial statement showing a firm's accounting value on a particular date is the: A. income statement. B. balance sheet. C. statement of cash flows. D. tax reconciliation statement. E. shareholders' equity sheet. A current asset is: A. an item currently owned by the firm. B. an item that the firm expects to own within the next year. C. an item currently owned by the firm that will convert to cash within the next 12 months. D. the amount of cash on hand the firm currently shows on its balance sheet. E. the market value of all items currently owned by the firm. The long-term debts of a firm are liabilities: A. that come due within the next 12 months. B. that do not come due for
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compiled on a quarterly and annually basis .
According to the Accounting Standards Board (1999), the objective of financial statement is to provide information on the reporting entity's financial position and performance that is useful to a wide range of users to assess the management and for decision making.
Composition of a complete financial statement
As per IAS 1 (international Accounting Standard), a complete set of financial statement comprises of:
* A statement of financial position (balance sheet)
* A statement of comprehensive income for the period (income statement)
* A statement of cash flow
* A statement of changes in equity
* Notes comprising a summary of significant
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National Student Financial Aid Scheme Funds
Trade and other receivables
Property, plant and equipment
Trade and other payables from exchange transactions
Operating lease liability
Trade and other payables from non‑exchange transactions
Statement of Financial Performance
Revenue from exchange transactions
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resultingdeferred tax liability should be recognised.The deferred tax is charged directly to carrying amount of equity component. Subsequentchanges in deferred tax liability are recognised in statement of comprehensive income asdeferred tax expense (or income)email@example.com
• 5. Recognition of Deferred Tax Asset:A deferred tax asset should be recognised (from the initial recognition and not difference thatarise from subsequent difference) for all deductible temporary differences arising fromchange in carrying amount of an asset to fair value.The reversal of deductible temporary difference means that there will be deductions indetermining taxable profits of future periods.A deferred tax