Free download Read online. Description Table of Contents Details Hashtags Report an issue Book Description Introduction to Financial Accounting is intended for a first course in introductory financial accounting. A corporate approach is utilized versus beginning with a sole proprietorship emphasis and then converting to a corporate approach.
The textbook focuses on core introductory financial accounting topics that match pre-requisite requirements for students advancing to Intermediate Financial Accounting.
Excluded are advanced topics that are covered in Intermediate Financial Accounting, such as leases and bond amortization. The textbook covers all essential topics, including: the accounting cycle; merchandising; assigning costs to inventory; cash and receivables; property, plant and equipment; debt financing; equity financing; statement of cash flows; financial statement analysis; and proprietorships and partnerships.
Introduction to Financial Accounting. Introduction to Financial Accounting is intended for a first course in introductory financial accounting. A corporate approach is utilized versus beginning with a sole proprietorship emphasis and then converting to a corpo Introduction to Financial Accounting: U.
GAAP Adaptation. It should probably try to reduce the level of inventory held and reduce the bank overdraft. Credit balance on suspense account treated as sales. This implies that CD has far higher expenses than AB. Similarly the quick asset ratio is too low. AB is by far the more successful business.
It is turning over its inventory more frequently and has kept expenses under control. It is also in a good liquid position and able to meet its debts. CD on the other hand is in a worse position on each factor. Loan note holders normally have no voice in the running of the company. Higher expenses.
Can this be maintained? Only then can we sensibly compare the return from the business with the return from the investment. Demerits depend on whether branch staff are given room for initiative within the above system, or else the HO stupidly lets the system strangle all initiative. Answer to Question 2. B Time basis. C Pro rata to sales. The split of cost of sales is rather tricky. Answer to Question 7. It should be reviewed annually for impairment.
It should not be amortised. Financial statements should be drawn up on the accrual basis and on the assumption that the entity is a going concern. See Chapter 13 Section Uniform account- ing policies should be used and, if possible, the same accounting date. Land normally is not to be depreciated.
Buildings are to be depreciated over normal expected useful life. Costs of maintenance do not mean that depreciation should not be charged. The degree of obsolescence and the full physical life will have to be taken into consideration. Straight line 25 per cent would take only four years to write cost down to nil.
On the other hand, 15 per cent reducing balance would take over three times that period. If repairs and maintenance are likely to be light in early years and heavy in later years, it may make sense to use a fairly high rate using the reducing balance method.
If it has, then this sum can be written off over an appropriate period. Sales prices are only used in certain cases, e. Market value of investments at These were.
Sometimes, management is accused of short-termism, for example delaying necessary capital expenditure in order to keep costs low. Non-current assets in Son and Daughter reduced by 1, Non-current assets in S2 reduced by 1, Large is therefore quite clearly a subsidiary undertaking and will be treated as such in the consolidated accounts.
This means that Medium is an associated or related undertaking. It will simply be shown as an investment. In this case, the company appears as if it may have liquidity prob- lems, possibly due to excessively high inventory. The EPS and dividend cover ratios would need to be compared to those of other companies in the same sector, as would all the other ratios calculated, before any further conclusions could be drawn. Report to Martha The analysis of the results which are shown above indicates a major query associated with the expenses of the existing business in the second half of the year.
The reasons behind these changes cannot be given since information is not given. If this trend continues, the business will be unable to meet its liability to creditors. If this is not managed, the owner needs to be advised of the necessity of urgent action. It will give some indication if comparisons are made over a period of time as to whether the business is investing and expanding or declining, and whether a proper capital structure is in place.
The capital structure will depend on the nature of the business and the risks it is involved with, whether it is high or low geared for example. The balance sheet, being a position statement at one point in time, does not give a dynamic picture of future prospects which are essential in planning liquidity. Examiners have been known to switch them, so always check which is which. This is a most disappointing result after experiencing such a marked increase in its sales activity.
Of course this is not a surprising result since more generous credit terms were offered in in order to stimulate sales. In subsequent years it may not be possible to carry on with this policy unless it is able to raise even more long-term funds.
Hence the com- pany has maintained its dividend at the same level as in Is this level necessary? What terms are customers given? Purchases cannot be calculated for but for the later years is: Cost of goods sold Add Closing inventory 45 85 Less Opening inventory 20 45 Purchases Purchases for are taken as cost of goods sold.
Revaluations of non-current assets do take place in many companies, but these are usually based on the views of professional valuers e. Balance sheets 2 AA has substantial freehold property. Such freehold property gives a large measure of solidarity to an investment, and also provides a useful security on which to borrow money if required.
BB appears to own no freehold or leasehold property — at least, no entry for either appears in its bal- ance sheet. AA may therefore have to face the cost of replacement before long. The working capital situation in both companies is satisfactory but the need for the overdraft in AA underlines the high stock and slow-paying debtors in that company.
By arithmetical deduction, Purchases is therefore 2, Purchases for is taken opening inventory not being known as same as Cost of sales. The extra sales generated of The revenue is recorded in a Revenue account not in the Retained Earnings account. The balance in the Revenue account is transferred to Retained Earnings at the end of the accounting period through the closing process.
Description Incurred cash expenses. Earned revenue on account. Earned cash revenue. Issued common stock for cash. Paid a cash dividend. Collected cash from customer accounts receivable. Used cash to pay off accounts payable. Incurred expenses on account. Equity Common Retained Stock Earn. Event Beg. Issued stk. Loan 4. On acct. AR collect. AP payment 7. Interest exp. Retained Acct.
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