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Grade 8 accounting equation
Financial statements and accounting transactions
Accounting equation and its element
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Fundamentals of Financial Statements
The accounting equation:
The accounting equation defines the relationship between the five account types. The
basic equation is assets equal liabilities plus equity. This is the format seen on a balance
sheet. The profit and loss accountsrevenues and expensesalso affects equity. Revenues
from the sale of goods and services increase equity, while expenses incurred in the course of
business decrease equity. Therefore, the accounting equation can be expanded to assets equal
liabilities plus equity plus revenues minus expenses. Small Business Accounting will record
the appropriate debits and credits, and track the changes to assets, liabilities, equity, revenue,
and expense accounts. Connie Rocha started a small new business Aunt Connie's Cookies',
and she would take care of the marketing activities. She wants to extend her business, and
Connie's only concern was that she needed some one to maintain the accounts in her new
firm. Here I am analyzing the transactions using Horizontal model. The model arranges the
balance sheet, income statement and statement of cash flows horizontally across a single line
of text as shown below.
Assets = Liabilities + Owner's Equity == Net Income = Revenue - Expenses
Balance Sheet Income Statement
Assets, Liabilities, Equity, Revenue and Expenses:
These are all the different types of accounting transactions the Aunt Connie's
accounting system utilizes. Assets are accounts that add value to Connie's individual or
business worth. Liabilities are accounts that remove value from Connie's individual or
business worth. Equity is used to identify the individual contribution of money, or other
financial equivalent, invested in individual or business worth. The revenue account is simply
the account that tracks all income generated. Expense accounts are the individual accounts
setup to record the financial transactions that occur, as expenditure, in generating that
income.
Even after the information has been recorded, further steps must be taken in order to
complete the accounting cycle. These include the adjusted the income statement, the
statement of changes in owner's equity, and the balance sheet (all of which are explained in
the Financial Statements section). Probably the best way to illustrate the idea of recording
Balance sheet lists assets, liabilities and owner’s equity. The assets listed on the balance sheet are acquired either by debt (liabilities) or equity. “Companies that use more debt than equity to finance assets have a high leverage ratio and an aggressive capital structure. A company that pays for assets with more equity than debt has a low leverage ratio and a conservative capital structure. That said, a high leverage ratio and/or an aggressive capital structure can also lead
Exhibits 1 and 4 present DHB’s original 2003-2004 balance sheets and income statements and the restated balance sheets and income statements for these two-year, respectively. Review the original and restated financial statements for 2004 and identify the “material” differences between them.
For instance, the profit making health organizations have the main intention of creating profits for the shareholders while the nonprofit organizations are created to further their mission (Knowing the Differences Between Nonprofit and For-Profit Accounting , 2015). Just the way these organizations differ in their purpose and foundation, they also differ in their accounting procedures. Their financial statements are presented in different ways. The financial statements prepared at the end of a year are also very different. The main reason for these differences is because the two organizations follow different accounting standards. In this part, I will lay an explicit focus on how the two organizations present the various items in the owners’ equity statement (Baker,
An important part of financial planning for corporations is the annual report. Publically held companies are required to submit an annual report to the SEC and private companies, even though not required, can use an annual report to gauge the performance of the company for the past year and use the report to plan for the future. The financial statements that make up an annual report are the income statement, the balance sheet, and the statement of cash flows. (Melicher, 2014) Once all of the financial information has been compiled and the three statements that make up the annual report have been completed a corporation can then start to analyze the data. There are several different categories of financial ratios
The amendments in this Accounting Standards Update improve financial reporting by eliminating the exceptions for qualifying special-purpose entities from the consolidation guidance and the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred financial assets. In addition, the amendments require enhanced disclosures about the risks that a transferor continues to be exposed to because of its continuing involvement in transferred financial assets. Comparability and consistency in accounting for transferred financial assets will also be improved through clarifications of the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting.
customers all around the world every day. She is one of the most successful women
...hasnt happened yet it would be very benacfial for her compnay. She works well alone and it has gotten her very far a a young estetician. her customers are great and expanding her services would also wrk in her favor and allow her regualars to try something new. Advestising could help her company grow but it might not help since she is the only one performing services.
In reviewing the company’s balance sheet, the current assets and liabilities were reviewed and liquidity ratios were calculated. The capital structure and the fixed and intangible asset accounting of the company were also reviewed. Off-balance sheet items such as leases and contingent liabilities were reported and noted. All of these aspects of the balance sheet were reviewed in order to do a proper analysis of the company’s balance sheet.
The purpose of preparing the consolidated financial statements is in order to combine the identifiable assets and liabilities (and contingent liabilities) and equity of two separate entities. At the date of acquisition assets and liabilities are measured at their fair value in order to ensure that assets are not overstated and liabilities
Statement of Changes in Equity shows how the equity of Alex and Will at the beginning of the year reconcile to their equity at the end of the year (Carey, Knowles, & Towers-Clark, 2014). By paying the final dividend, it will reduce the retained profits in the statement. It will have small impact on profits if the invested cash is to generate interest income.
The Purpose of Financial Statements The financial statements of a business are used to provide information about the status of the business, set performance targets and impose restrictions on the managers of the firm as well as provide an easier method for financial planning. The financial statements consist of the Profit and Loss Account, Balance Sheet and the Cash Flow Statement. There are four areas of information, which we can collect from a company's financial statements. They are: Ÿ Profitability - This information comes from the Profit and Loss account. Were we can compare this year's profit with the previous years.
The statement of the financial position is also known as balance sheet has shown the accounting equation, Assests = Liabilities + Equity. The statement of the financial position shows the current assets, liabilities and equity owned by a business during an accounting period.
The accounting equation-: Accounting equation tells us a easy way to understand that law assets, liabilities of
Balance sheets are very important for parties like suppliers, investors, competitors, customers, etc. to know the company’s position, company’s strength and company’s weaknesses. Balance sheets helps to ascertain the amount of capital employed in the business so that we can further calculate different types of ratios. Some important objectives of preparing balance sheets are: