Provisional financial statements are prepared on the basis of past data i.e. for the period which is already over. For example, the bank requested for Q4 financial statement but there were still 15 days left for the quarter to get over. In this case, the business/company will prepare a provisional fRead more
Provisional financial statements are prepared on the basis of past data i.e. for the period which is already over. For example, the bank requested for Q4 financial statement but there were still 15 days left for the quarter to get over. In this case, the business/company will prepare a provisional financial statement.
Provisional financial statements can be requested by banks, investors, and large vendors while making decisions regarding business and want current financial statements which can be obtained easily.
It is prepared with the help of past actual figures on a particular date or before the end of a financial statement. The main purpose of preparing is to show the company’s financial position on a particular date. Items of the provisional financial statement are assets, liabilities, and equity/capital.
The correct option is (b) and (d) As the internal analysis is done for the internal assessment of the firm, only those persons can carry out the assessment who has access to the internal accounting records of a business firm. As the owners or managers are the members of the top-level management execRead more
The correct option is (b) and (d)
As the internal analysis is done for the internal assessment of the firm, only those persons can carry out the assessment who has access to the internal accounting records of a business firm. As the owners or managers are the members of the top-level management executives they can carry out the work of internal analysis. Also, the government agencies can carry out internal analysis as they have been given the statutory powers of doing such works.
To make it clear, let me explain a little about internal analysis-
To determine the profitability of various activities and operations or to know the performance of the business concern, the top-level executives along with the management accountant carry out an internal assessment of the financial statements within the concern, this process is known as internal analysis.
As per the Income-tax act, solar panels are categorized under the heading renewal energy devices. The rate of depreciation for these devices is mentioned below. As per the act, the rate of depreciation for solar panels is given as 40% as per the WDV method. Generally, these devices are treated as inRead more
As per the Income-tax act, solar panels are categorized under the heading renewal energy devices. The rate of depreciation for these devices is mentioned below.
As per the act, the rate of depreciation for solar panels is given as 40% as per the WDV method. Generally, these devices are treated as investments in fixed assets. Therefore they are treated accordingly like other fixed assets and are depreciated periodically in an organized and regular time period. The useful life of such solar devices is taken to be 5 years.
Giving you a small example of the depreciation on solar panels.
Solar panels were purchased by Agro Farm ltd. for installing them to be used for electricity generation. These panels were bought for Rs 2,00,000. Therefore depreciation to be charged as per income tax act over its useful life of 5 years is as follows:
Depreciation as per WDV = (Cost of an asset – salvage value)* rate of depreciation
Depreciation for 1st year = (2,00,000 – 0)* 40% = Rs 80,000
WDV at the end of 1st year = (2,00,000 – 80,000) = Rs 1,20,000
Depreciation for 2nd year = (1,20,000 – 0)* 40% = Rs 48,000
the same process will continue till the useful life of an asset.
The depreciation amount will be written off from the book value as shown below:
The correct answer is C. Balance Sheet. A Balance Sheet is a financial statement prepared to know the financial position of a company at any particular point in time. Hence, the answer to your question is the balance sheet. It is also known as Position Statement (as it shows financial position) or SRead more
The correct answer is C. Balance Sheet.
A Balance Sheet is a financial statement prepared to know the financial position of a company at any particular point in time. Hence, the answer to your question is the balance sheet.
It is also known as Position Statement (as it shows financial position) or Statement of Affairs (when it is prepared under the Single Entry System of accounting).
The balance sheet shows the assets and liabilities of a firm at any specific point in time. It is a summary of the assets held by a firm and the liabilities owed to outsiders.
As the name suggests, a balance sheet must always be balanced i.e, the total of assets should always be equal to the total of liabilities on any single day. To put it simply,
Assets = Liabilities + Capital
In the case of a sole proprietorship or partnership, capital means the amount invested by the proprietor/partners in the business. In the case of a company, capital means the funds contributed by the shareholders in the form of shares.
Here is a link for the official balance sheet format as per the Companies Act 2013 (page 260 of the pdf),
Financial analysis of a company means analyzing the previous data of the company and giving recommendations based on that whether the company will improve in the future on not. It is the process of evaluating the financial performance and stability of the company. There are various types of financiaRead more
Financial analysis of a company means analyzing the previous data of the company and giving recommendations based on that whether the company will improve in the future on not.
It is the process of evaluating the financial performance and stability of the company.
There are various types of financial analysis. They are leverage, growth, cash flow, liquidity, profitability, etc.
The main objectives of Financial analysis are
1.Reviewing the current position: In order to know if the company is doing well, past analysis of data is required to be carried out. Regular recording of the transactions helps to understand the financial position of the company.
For example, A company wants to generate a revenue of 2000 crores in the next 5 years. The last four years’ data shows revenue as 1100, 1300,1600, 1800 crores respectively.
So from the above, we can say that the company is performing well and looks like it will reach the desired target in the fifth year or may perform better than the target desired.
However, if the revenue declines, it will cause concern for the team but the team will get time to gear up and work efficiently to achieve the desired target.
2. Ease in decision making: For Future decision-making, quarterly financials play an important role. Subsidiary books and accounts like the sales book, purchase orders, manufacturing a/c, etc. help in giving more reliable information.
For example, If sales are increasing inconsistently in a quarter, and in the next quarter the level of sales decrease due to any reason then the management can analyze and change the strategy.
3. Performance Comparison: It helps in comparing the performance of the business every month, quarterly, half-yearly, and yearly. Analyzing the data can help the management to compare if the company is proceeding in the right direction.
4. Assessing the profitability: Financial statements are used to assess the profitability of the firm. The analysis is made through the accounting ratios, trend line, etc. Accounting ratios calculated for a number of years shows the trend of change of position i.e. positive, negative or static. The assessing of the trend helps the management to analyze if the company is making profits or not.
5. Measure the solvency of the firm: Financial analysis helps to measure the short-term and long-term efficiency of the firm for the benefit of the Stakeholders.
6. Helps the end-users: The owners are the end-users for whom the financial statements are prepared. Financial statements are the summaries that are prepared for providing various disclosures to the owners which helps them understand the statements in a better way. If the end-users arrive at the right decision with the help of financial statements that means the objective is achieved.
7. Other objectives:
It helps to settle disputes among the parties.
It helps in the expansion decision of the firm.
It helps in analyzing the amount of tax to be paid.
It reduces the chances of fraud.
It provides information about resources.
It provides a true and fair view of financial position.
Return inwards are the goods returned by the customer to the seller. The goods are returned for reasons like defects, excess delivery, and low quality. Return inwards are also known as Sales Returns. Sales returns are a contra account to sales revenue. The amount of sales returns is deducted from thRead more
Return inwards are the goods returned by the customer to the seller. The goods are returned for reasons like defects, excess delivery, and low quality. Return inwards are also known as Sales Returns.
Sales returns are a contra account to sales revenue. The amount of sales returns is deducted from the total sales in the Trading section of the Trading and Profit & Loss Account.
In subsidiary books, return inwards are recorded only for those goods which are sold on credit to the customer.
For example, On 1 August E Electronics sold 50 units of television to Hill Hotels on credit for Rs.25,000 each. Out of which 5 units were found to be defective and were returned back to E Electronics. In that accounting period, E Electronics made a total sales of Rs.20,00,000 (including the item sold to Hill Hotels).
E Electronics in its Trading section of Trading and P&L A/c will account for a sales return of Rs.1,25,000 (Rs.25,000*5) and this amount will be deducted from the total sales. The same will be recorded in the subsidiary books as it accounts for sales made on credit.
Extract of Profit & Loss Account:
For a business, sales returns will either have a decrease in the sales revenue or it will increase the sales returns and allowances which is a contra account to sales revenue. An increase in sales returns will decrease gross profit.
The Furniture and Fixture is depreciated @10% according to the income tax act and as per the companies act, 2013 @9.50% under Straight line method and @25.89% under written down value method. Furniture and fixture form a major part to furnish an office. For Example, the chair, table, bookshelves, etRead more
The Furniture and Fixture is depreciated @10% according to the income tax act and as per the companies act, 2013 @9.50% under Straight line method and @25.89% under written down value method.
Furniture and fixture form a major part to furnish an office. For Example, the chair, table, bookshelves, etc. all comes under Furniture and Fixture. The useful life of Furniture and Fixtures is estimated as 5-10 years depending upon the kind of furniture.
Rate of depreciation in reference to days
If Furniture is bought and put to use for more than 180 days, then the full rate of depreciation will be charged.
If the furniture is bought and put to use for less than 180 days, then half the rate of depreciation will be charged.
If the furniture is bought but is not put to use, then no depreciation will be charged.
Explain provisional financial statements?
Provisional financial statements are prepared on the basis of past data i.e. for the period which is already over. For example, the bank requested for Q4 financial statement but there were still 15 days left for the quarter to get over. In this case, the business/company will prepare a provisional fRead more
Provisional financial statements are prepared on the basis of past data i.e. for the period which is already over. For example, the bank requested for Q4 financial statement but there were still 15 days left for the quarter to get over. In this case, the business/company will prepare a provisional financial statement.
Provisional financial statements can be requested by banks, investors, and large vendors while making decisions regarding business and want current financial statements which can be obtained easily.
It is prepared with the help of past actual figures on a particular date or before the end of a financial statement. The main purpose of preparing is to show the company’s financial position on a particular date. Items of the provisional financial statement are assets, liabilities, and equity/capital.
See lessInternal analysis of financial statements is done by?
The correct option is (b) and (d) As the internal analysis is done for the internal assessment of the firm, only those persons can carry out the assessment who has access to the internal accounting records of a business firm. As the owners or managers are the members of the top-level management execRead more
The correct option is (b) and (d)
As the internal analysis is done for the internal assessment of the firm, only those persons can carry out the assessment who has access to the internal accounting records of a business firm. As the owners or managers are the members of the top-level management executives they can carry out the work of internal analysis. Also, the government agencies can carry out internal analysis as they have been given the statutory powers of doing such works.
To make it clear, let me explain a little about internal analysis-
To determine the profitability of various activities and operations or to know the performance of the business concern, the top-level executives along with the management accountant carry out an internal assessment of the financial statements within the concern, this process is known as internal analysis.
See lessDepreciation on solar panels as per income tax act?
As per the Income-tax act, solar panels are categorized under the heading renewal energy devices. The rate of depreciation for these devices is mentioned below. As per the act, the rate of depreciation for solar panels is given as 40% as per the WDV method. Generally, these devices are treated as inRead more
As per the Income-tax act, solar panels are categorized under the heading renewal energy devices. The rate of depreciation for these devices is mentioned below.
As per the act, the rate of depreciation for solar panels is given as 40% as per the WDV method. Generally, these devices are treated as investments in fixed assets. Therefore they are treated accordingly like other fixed assets and are depreciated periodically in an organized and regular time period. The useful life of such solar devices is taken to be 5 years.
Giving you a small example of the depreciation on solar panels.
Solar panels were purchased by Agro Farm ltd. for installing them to be used for electricity generation. These panels were bought for Rs 2,00,000. Therefore depreciation to be charged as per income tax act over its useful life of 5 years is as follows:
Depreciation as per WDV = (Cost of an asset – salvage value)* rate of depreciation
Depreciation for 1st year = (2,00,000 – 0)* 40% = Rs 80,000
WDV at the end of 1st year = (2,00,000 – 80,000) = Rs 1,20,000
Depreciation for 2nd year = (1,20,000 – 0)* 40% = Rs 48,000
the same process will continue till the useful life of an asset.
The depreciation amount will be written off from the book value as shown below:
See lessThe following is a statement showing the financial status of the company at any given time?
The correct answer is C. Balance Sheet. A Balance Sheet is a financial statement prepared to know the financial position of a company at any particular point in time. Hence, the answer to your question is the balance sheet. It is also known as Position Statement (as it shows financial position) or SRead more
The correct answer is C. Balance Sheet.
A Balance Sheet is a financial statement prepared to know the financial position of a company at any particular point in time. Hence, the answer to your question is the balance sheet.
It is also known as Position Statement (as it shows financial position) or Statement of Affairs (when it is prepared under the Single Entry System of accounting).
The balance sheet shows the assets and liabilities of a firm at any specific point in time. It is a summary of the assets held by a firm and the liabilities owed to outsiders.
As the name suggests, a balance sheet must always be balanced i.e, the total of assets should always be equal to the total of liabilities on any single day. To put it simply,
Assets = Liabilities + Capital
In the case of a sole proprietorship or partnership, capital means the amount invested by the proprietor/partners in the business. In the case of a company, capital means the funds contributed by the shareholders in the form of shares.
Here is a link for the official balance sheet format as per the Companies Act 2013 (page 260 of the pdf),
https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf
See lessWhat are the objectives of Financial Analysis?
Financial analysis of a company means analyzing the previous data of the company and giving recommendations based on that whether the company will improve in the future on not. It is the process of evaluating the financial performance and stability of the company. There are various types of financiaRead more
Financial analysis of a company means analyzing the previous data of the company and giving recommendations based on that whether the company will improve in the future on not.
It is the process of evaluating the financial performance and stability of the company.
There are various types of financial analysis. They are leverage, growth, cash flow, liquidity, profitability, etc.
The main objectives of Financial analysis are
1.Reviewing the current position: In order to know if the company is doing well, past analysis of data is required to be carried out. Regular recording of the transactions helps to understand the financial position of the company.
For example, A company wants to generate a revenue of 2000 crores in the next 5 years. The last four years’ data shows revenue as 1100, 1300,1600, 1800 crores respectively.
So from the above, we can say that the company is performing well and looks like it will reach the desired target in the fifth year or may perform better than the target desired.
However, if the revenue declines, it will cause concern for the team but the team will get time to gear up and work efficiently to achieve the desired target.
2. Ease in decision making: For Future decision-making, quarterly financials play an important role. Subsidiary books and accounts like the sales book, purchase orders, manufacturing a/c, etc. help in giving more reliable information.
For example, If sales are increasing inconsistently in a quarter, and in the next quarter the level of sales decrease due to any reason then the management can analyze and change the strategy.
3. Performance Comparison: It helps in comparing the performance of the business every month, quarterly, half-yearly, and yearly. Analyzing the data can help the management to compare if the company is proceeding in the right direction.
4. Assessing the profitability: Financial statements are used to assess the profitability of the firm. The analysis is made through the accounting ratios, trend line, etc. Accounting ratios calculated for a number of years shows the trend of change of position i.e. positive, negative or static. The assessing of the trend helps the management to analyze if the company is making profits or not.
5. Measure the solvency of the firm: Financial analysis helps to measure the short-term and long-term efficiency of the firm for the benefit of the Stakeholders.
6. Helps the end-users: The owners are the end-users for whom the financial statements are prepared. Financial statements are the summaries that are prepared for providing various disclosures to the owners which helps them understand the statements in a better way. If the end-users arrive at the right decision with the help of financial statements that means the objective is achieved.
7. Other objectives:
- It helps to settle disputes among the parties.
- It helps in the expansion decision of the firm.
- It helps in analyzing the amount of tax to be paid.
- It reduces the chances of fraud.
- It provides information about resources.
- It provides a true and fair view of financial position.
See lessHow to treat return inwards in profit and loss account?
Return inwards are the goods returned by the customer to the seller. The goods are returned for reasons like defects, excess delivery, and low quality. Return inwards are also known as Sales Returns. Sales returns are a contra account to sales revenue. The amount of sales returns is deducted from thRead more
Return inwards are the goods returned by the customer to the seller. The goods are returned for reasons like defects, excess delivery, and low quality. Return inwards are also known as Sales Returns.
Sales returns are a contra account to sales revenue. The amount of sales returns is deducted from the total sales in the Trading section of the Trading and Profit & Loss Account.
In subsidiary books, return inwards are recorded only for those goods which are sold on credit to the customer.
For example, On 1 August E Electronics sold 50 units of television to Hill Hotels on credit for Rs.25,000 each. Out of which 5 units were found to be defective and were returned back to E Electronics. In that accounting period, E Electronics made a total sales of Rs.20,00,000 (including the item sold to Hill Hotels).
E Electronics in its Trading section of Trading and P&L A/c will account for a sales return of Rs.1,25,000 (Rs.25,000*5) and this amount will be deducted from the total sales. The same will be recorded in the subsidiary books as it accounts for sales made on credit.
Extract of Profit & Loss Account:
For a business, sales returns will either have a decrease in the sales revenue or it will increase the sales returns and allowances which is a contra account to sales revenue. An increase in sales returns will decrease gross profit.
See lessExplain with rates furniture and fixtures depreciation.
The Furniture and Fixture is depreciated @10% according to the income tax act and as per the companies act, 2013 @9.50% under Straight line method and @25.89% under written down value method. Furniture and fixture form a major part to furnish an office. For Example, the chair, table, bookshelves, etRead more
The Furniture and Fixture is depreciated @10% according to the income tax act and as per the companies act, 2013 @9.50% under Straight line method and @25.89% under written down value method.
Furniture and fixture form a major part to furnish an office. For Example, the chair, table, bookshelves, etc. all comes under Furniture and Fixture. The useful life of Furniture and Fixtures is estimated as 5-10 years depending upon the kind of furniture.
Rate of depreciation in reference to days
- If the furniture is bought but is not put to use, then no depreciation will be charged.
See less