Task 1 – Questions 1 Income statement-: Income statement is the financial statement that measures a company 's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. Balance sheet-: Balance sheet is a statement at the book value of all of the assets and liabilities of a business or other organization present a particular date such as the end of the financial year. It is known as a balance sheet because it reflection accounting identity the components of the balance sheets. The balance sheet must follow the following formula: Assets = Liabilities + Shareholders ' Equity Question 2 The accounting equation-: Accounting equation tells us a easy way to understand that law assets, liabilities of …show more content…
Equity in business means an owner cannot own 100% of the business shares ownership with others and accounting for business should be separate from all personal affairs of its own. This means the person(owner) should not place any personal assets to the business balance sheet. For e.g.Expenditure of car should not be written on the balance sheet. The revenue/cost period-: Revenue and the cost period in accounting that the company get income from normal business activities. It’s referred to normal business income that the company got by selling their product and service. Question 3 Assets The resource of a business that owner own are called assets for example building, machinery etc. In other words we can say the thing that owned by a person a regard to company and having value, commitment and legacies. Liabilities Liabilities are the depth to be Payee by a person or company to bank or other company like if a person buys car $10000 and paid 2000 in cash then instalments of $8000 is to be paid in instalments is
A strong balance sheet gives an investor an idea of how financially stable the company really is. Many professionals consider the top line, or cash, the most important item on a company’s balance sheet. The big three categories on any balance sheet are “assets, liabilities, and shareholder equity.” Evaluating Barnes & Noble’s assets for the time 2014 at $3,537,449, 2013 at $3,732,536 and 2012 at $3,774,699, the company’s performance summarizes that it is remaining stable. These numbers reflect a steady rate over the three year period. Like assets, liabilities are current or noncurrent. Current liabilities are obligations due within a year. Key investors look for companies with fewer liabilities than assets. Analyzing this type of important information, informs a potential investor that if the company owes more money than they are bringing in that this company is in financial trouble. Assessing the liabilities of the balance sheet, for the same time period, it is also consistent with the assets. The cash flow demonstrates a stable performance in the company’s assets and would be determined that the liabilities of this company are also stable. Equity is equal to assets minus liabilities, and it represents how much the company’s shareholders actually have a claim to. Investors customarily observe closely
The balance sheet is used to report the financial position, including amount of assets, liabilities, and stockholders’ equity of an accounting entity at a specific point in time. It includes the name of the entity, title of the statement, specific date of the statement, and units of dollars. The accounting entity should also be precisely defined (Bethel, 2011).
Income statement gives us a summary of incomes and expenses for a given accounting period. It gives the financial performance on how the business incur it revenues and how it spent it through operating and non-operating cost activities. With income statement one can see expenses of income and adjust accordingly.
Accounting in general has many terms that are important to know and understand when dealing in the financial realm. When looking at these terms and understanding how they are implied it is important to remember what the objective of businesses are: to earn a profit and remain out of bankruptcy. To better understand how a company can achieve these objectives we need to understand accounting’s terms and principles first. In order to do that we will look at five concepts that are important to Accounting: Generally Accepted Accounting Principles (GAAP), Contra-Asset Accounts, Historical cost, Accrual Basis vs. Cash Basis Accounting, and Accounting Standards Codification.
Data on the income statement includes quarterly (one-year) time range and discloses the costs and revenues of the company, net income and deductions from it in the reserves, the payment of dividends and so on. From these data it is possible to obtain information about the value and dynamics of the value of output, its cost and the financial condition of the company and for the previous reporting
The term ‘wealth’ can be interpreted as the current capital/ equity that the entity holds. Thus, as preparing a balance sheet, accountants have provided users with information of the ‘wealth’ of the business. In addition, all financial statements are prepared in the same manner, based on the Conceptual Framework and accounting standards. So, in such a way, the balance sheet can reflect the objective ‘wealth’ of the entity. Besides, the Corporations Act has implemented ‘true and fair view’ criteria that every accountants need to comply with in preparing financial statements.
The purpose of this document is to describe the nature, purpose and scope of accounting and it deliberately explains the details of each category in accounting. Accounting involves in preparing financial documents of an entity by analyzing, verifying, and reporting this records. It emphasizes its major characteristic role in field of banking and finance, with a mixture of supportive sub topics.
Enough cash needs to enter the business in order to pay for and therefore cover all the expenses of the business. Most purchases or payments are done via the customer’s or patient’s medical aid. Thus, allowing payments via card facilities. In this case all the rules need to be clear and late payments should be followed up. By keeping accurate and clear financial records will help the business to be financially sustainable. Cash flow statements allow one to see the flow of cash through a business. A positive cash flow balance indicates that the business is receiving more cash into the business than they are letting out (to pay for expenses). The balance sheet of a business indicates a snapshot of the business’s financial position. The balance sheet also helps determine what assets the business owns and what liabilities the business owes. The Balance sheet will help monitor the stability and sustainability of one’s business. Having no financial sustainability will result in a business not surviving in the
100 units of an item were purchased one month back for $10 per unit. The price today is $11 per unit. The inventory shall appear on balance sheet at $1,000 and not at $1,100.
Accounting is the recording of financial transactions plus storing, sorting, retrieving, summarizing, and presenting the information in various reports and analyses. All accounting or book keeping has a standard set of accounting principles. It stands for every type of business. In this way there is unity in all business accounting procedures to ensure that there is unity and a clear understanding no matter what business is being monitored. This system is called GAAP or Generally Accepted Accounting Principles and are general rules that all businesses follow when recording their financial information. There is no law enforcing this, but it is to the advantage of a business to use this when reporting to the different
Both accounting and finance deal with money and assets; however, they are categorically different concepts. This portion of the essay will discuss the dissimilarities between accounting and finance. Examples of different concepts will be given for both practices.
A balance sheet is also referred to as a statement of financial position. The balance sheet gives a summary of the company’s liabilities, assets, and the shareholders’ equity at a given time. The balance sheet is usually made at the end of a financial year and it is the only statement among the three basic financial statements that applies at one point in the calendar year of a business. The balance sheet is usually written systematically. As stated earlier, it has three parts and the first part of the balance sheet is the assets. The assets are listed in order of liquidity from most liquid to least liquid. The assets are then followed by the liabilities. The difference between total assets and total liabilities gives the net assets, i.e. the net worth of a company. This is according to the equation of accounting where net worth must be equal to assets less liabilities.
The accounting equation is the foundation or basic of accounting systems. The equation maintain for all transactions and business activities. Every asset that the company hold is always equal to the liabilities and equity. Therefore, the accounting equation is : ASSETS = LIABILITIES + EQUITY. For example, when we start a company, we must take a loan from investors or any of the institutions. Now, we take a look at each accounting equation starting with the asset.
Assets are those things that are owned by an organization which have future economic value that are measurable and expressed in terms of monetary value. Basically assets are those resources which are acquired by a company through various transactions. (accounting coach, 2016)
Accounting is one of the fundamentals of any business because it is a means and a key factor in achieving financial stability. The work of accountants in companies also helps identify and measure their financial wealth, which includes liquidity and profit rates. Without accounting, companies will not be able to make various decisions, Term accounting is considered to be a science based on the use of financial information. To track accounting activity in conjunction with IT resources, the accounting information system is considered the best system. . Financial reports generated internally by management or externally by other interested parties including investors, creditors, tax authorities, reporting and administrative accounting and tax accounting information systems are designed.