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
Hermanson, R., Edwards, J., & Maher, M. (2010).Accounting principles: A business perspective. (Vol. 2). Textbook Equity inc. DOI: www.textbookequity.com
The statement displays the relationship of the net income to the changes in the cash balances. It is important to understand that cash balances can wane despite an increase in net revenue (Horngren, 2014, p. 674). The statement also aids in the evaluation of management’s use of cash and management’s generation, defining a company’s capability to pay dividends and interest to pay debts when the time comes to pay them, and forecasting upcoming cash flows (Horngren, 2014, p. 674). The balance sheet displays the status of an entity at a specific time. Contrary to the balance sheet, income statements and cash flows cover periods over time.
• Accounting (financial) statements for a period of several years. The statements include the balance sheet and profit and loss account, in addition, cash flow statement, capital and the annex to the financial balance.
A bank balance sheet is different from that of a typical company. Explain the difference A balance sheet is a financial statement which shows the states of financial affairs of a particular business at a particular point in time. The balance sheet discloses the assets, liabilities and equities of the business at a particular point in time. A Bank balance sheet is a typical statement of financial position of the bank. Bank balance sheets are substantially different from company balance sheets, which summarize the net assets of a company by subtracting total liabilities from total assets to arrive at total equity. Many of the differences between the assets and liabilities of banks and those of other companies lie in the ways they are recorded
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 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).
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.
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
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)
The statement of financial position (the balance sheet) is one of the basis statements of financial reporting. The balance sheet is expected to present an objective view of the wealth of the entity.
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.
In the above cited the accounting of business is use to record and measure the size of the business, in terms of gains and loss on monthly, quarterly Semi- Annual and Annual basis. Use of the accounting in business, gives a clear review of net income, helps to plan budget of the business accordingly.
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
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.
The amounts payable are often classified as creditors for the purchase of physical goods recorded in the inventory, commercial creditors, expenses payable and creditors for the purchase of goods or services to be disbursed. Common examples of creditors' expenses are advertising and travel. The purpose of the management of accounts payable is to ensure that all payments of the University's funds are made in accordance with generally accepted accounting principles. This means providing external customers as well as internal customers with more efficient, accurate and prompt service. The responsibility for the management of accounts payable is the assessment and preparation of payments, corporate travel cards, cash advances, travel expenses, petty cash and payment of goods and services provided by individuals and sellers. These amounts are