IAS 7 Statement of Cash Flows, Definitions

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The following terms are used in this Standard with the meanings specified: Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash flows are inflows and outflows of…

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Purpose Of Disclosure Notes

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Disclosures provide non-financial (qualitative) information to users of financial statements. Some information relevant to users are difficult to assign a financial value, such as compliance with law. This information influences the financial performance and position of the entity in the long term, such as breach of health and safety legislation can result in severe financial…

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Interrelationship b/w Parts of Financial Statements

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Statement of financial position shows the financial position of the entity at particular point in time. Statement of financial position includes closing balances of all control accounts maintained by the entity. Therefore, it represents the financial position at the end of accounting period. Income statement is a part of statement of comprehensive income. Income statement…

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Accounting for Under and Over Provision of Tax

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Under provision is tax liability calculated using accounting profit was lower than tax liability calculated using tax rules. Over provision is tax liability calculated using accounting profit was higher than tax liability calculated using tax rules. Accounting profit is calculated based on accrual principle. Whereas, taxable profit is calculated on cash basis other than exceptional…

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Recognition of Revenues and Expenses

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According to the Prudence concept, revenues should not be recognized until it is certain that it will result in inflow of economic benefits such as cash or kind to the entity. Similarly, expenses should be recognized immediately until it is uncertain (< 50%) that it will result in outflow of economic benefits such as cash…

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Performa Statement of Comprehensive Income

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Performa Statement of Comprehensive Income for the period end Dec 2017   Notes $(000) $(000) Sale Revenue 3 xx   Cost of Sales 4     Material   xx   Labour   xx   Overheads (plant & building depn, power cost etc)   xx xx Gross Profit     xx Other Income      …

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What is Retained Earnings

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Retained earnings are the profit earning after payment of dividends to preference shareholders. Dividend to ordinary shareholders is paid from retained earnings. Retained earnings show the amount of assets internal generated and retained in the entity after making initial investment in the assets of the entity. Retained earnings shows to increase in equity or owners…

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Performa Statement of Financial Position

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Performa Statement of Financial Position as on period ended 31 Dec 2017   Notes   $(000) $(000) ASSETS         Non-current assets         Property, plant & equipment 11 xx     Less: depreciation   (xx)   xx Development expenditure     xx   Good will     xx   Total…

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Purpose Of A Suspense Account

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Suspense accounts are open by bookkeeper to make entries for which accounting treatment of transaction is not known. Example: Suspense account opened by bookkeeper for posting repair & maintenance expenditure, as he/she is unsure whether to capitalize it as non-current asset or expensed in profit & loss. Suspense account is temporary account. All the entries…

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Reasons For Differences b/w Cash Book & Bank Statement

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1       Cash Book 1.1     Adjustment to Debit Side Check dishonoured Cashbook understated due to error or omission 1.2     Adjustment to Credit Side Cashbook overstated due to error or omission Direct debit or standing order 2       Bank Statement 2.1     Adjustment to Debit Side Clearing check deposit just before month end Bank statement overstated due to error…

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