tag:blogger.com,1999:blog-81028707353510642422024-03-16T03:34:03.737-07:00MBATAB-Financial Accounting BlogMBATAB is a Professional Support Group designed to provide a forum for MBA Students to find motivation, accountability and support by a highly qualified accounting professionals, Investment banking professionals and subject matter experts from fortune 500 financial services industry.Learn Skills - Skilllenshttp://www.blogger.com/profile/15668014452214716949noreply@blogger.comBlogger107125tag:blogger.com,1999:blog-8102870735351064242.post-84891684725720852052015-06-30T04:47:00.000-07:002015-06-30T04:47:12.521-07:00MBA TAB - FINANCE TRAINING FOR MBA STUDENTS
MBA TAB - FINANCE TRAINING FOR MBA STUDENTS
<iframe src="//www.slideshare.net/slideshow/embed_code/key/x6keIseqCE9Jmy" width="595" height="485" frameborder="0" marginwidth="0" marginheight="0" scrolling="no" style="border:1px solid #CCC; border-width:1px; margin-bottom:5px; max-width: 100%;" allowfullscreen> </iframe> <div style="margin-bottom:5px"> <strong> <a href="//www.slideshare.net/MBATAB/mba-tab-training-reviews" title="MBA TAB TRAINING REVIEWS" target="_blank">MBA TAB TRAINING REVIEWS</a> </strong> from <strong><a href="//www.slideshare.net/MBATAB" target="_blank">MBATAB .</a></strong> </div>Learn Skills - Skilllenshttp://www.blogger.com/profile/15668014452214716949noreply@blogger.com0Hyderabad, Telangana, India17.385044 78.48667116.9002155 77.841224 17.8698725 79.132118tag:blogger.com,1999:blog-8102870735351064242.post-38881444167915453532012-10-30T21:07:00.000-07:002012-10-30T21:07:14.291-07:00Income Statement Analysis<div dir="ltr" style="text-align: left;" trbidi="on">
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<b style="mso-bidi-font-weight: normal;"><span style="color: black; font-family: Arial; font-size: 14pt;">Income Statement Analysis :<o:p></o:p></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: black; font-family: Arial; font-size: 11pt;">Revenue : <o:p></o:p></span></b></div>
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<span style="color: black; font-family: Arial; font-size: 11pt;">Amount realized by a company through sales.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: black; font-family: Arial; font-size: 11pt;">Net Sales :<o:p></o:p></span></b></div>
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<span style="color: black; font-family: Arial; font-size: 11pt;">Sales minus Sales Returns represents Net Sales.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: black; font-family: Arial; font-size: 10pt;">Net Sales= Sales – Sales Returns<o:p></o:p></span></b></div>
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<span style="color: black; font-family: Arial; font-size: 11pt;"><br /></span><strong><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Cost of Goods Sold:</span></strong><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;"><o:p></o:p></span></div>
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<em><span lang="EN" style="font-family: Arial; font-size: 11pt; font-style: normal; mso-ansi-language: EN; mso-bidi-font-style: italic;">Cost of goods sold</span></em><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;"> is the accumulated total of all <a href="http://www.accountingtools.com/definition-cost"><span style="color: windowtext;">costs</span></a> used to create a product or service, which has been sold. These costs fall into the general sub-categories of direct labor, materials, and overhead. <o:p></o:p></span></div>
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<span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">In a service business, the cost of goods sold is considered to be the labor, payroll taxes, and benefits of those people who generate billable hours ("Cost of Services").<o:p></o:p></span></div>
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<span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">In the income statement, the cost of goods sold is subtracted from revenues to arrive at the gross margin of a business.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Cost Of Goods Sold</span></b><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;"> =Beginning <a href="http://www.accountingtools.com/dictionary-inventory"><span style="color: windowtext;">Inventory</span></a> + Purchases - Ending Inventory. <o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN" style="color: #333333; font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">COGS</span></b><span lang="EN" style="color: #333333; font-family: Arial; font-size: 11pt; mso-ansi-language: EN;"> also include <b style="mso-bidi-font-weight: normal;">Direct Costs</b> such as:<o:p></o:p></span></div>
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<li class="MsoNormal" style="color: #333333; margin: 0in 0in 0pt; mso-list: l3 level1 lfo2; tab-stops: list .5in; text-align: justify;"><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Labor to produce the product, supplies used in manufacture or sale, <o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; margin: 0in 0in 0pt; mso-list: l3 level1 lfo2; tab-stops: list .5in; text-align: justify;"><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Shipping costs, costs of containers, freight in, and <o:p></o:p></span></li>
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<span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">The assumption is that the result, which represents costs no longer located in the warehouse, must be related to goods that were sold. Actually, this cost derivation also includes inventory that was scrapped, or declared <a href="http://www.accountingtools.com/obsolete-inventory-accounting"><span style="color: windowtext;">obsolete</span></a> and removed from stock, or inventory that was stolen. Thus, the calculation tends to assign too many expenses to goods that were sold.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Types of COGS:<o:p></o:p></span></b></div>
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<span lang="EN" style="color: #333333; font-family: Verdana; font-size: 9pt; mso-ansi-language: EN;">There are two types of costs included in COGS: <o:p></o:p></span></div>
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<b><span lang="EN" style="color: #333333; font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Direct Costs:</span></b><span lang="EN" style="color: #333333; font-family: Arial; font-size: 11pt; mso-ansi-language: EN;"><o:p></o:p></span></div>
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<span lang="EN" style="font-family: 'Courier New'; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-fareast-font-family: 'Courier New';"><span style="mso-list: Ignore;">o<span style="font: 7pt 'Times New Roman';"> </span></span></span><span lang="EN" style="font-family: Arial; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: 'Times New Roman';">Cost to purchase the merchandise for resale.<o:p></o:p></span></div>
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<span lang="EN" style="font-family: 'Courier New'; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-fareast-font-family: 'Courier New';"><span style="mso-list: Ignore;">o<span style="font: 7pt 'Times New Roman';"> </span></span></span><span lang="EN" style="font-family: Arial; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: 'Times New Roman';">Cost of raw materials.<o:p></o:p></span></div>
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<span lang="EN" style="font-family: 'Courier New'; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-fareast-font-family: 'Courier New';"><span style="mso-list: Ignore;">o<span style="font: 7pt 'Times New Roman';"> </span></span></span><span lang="EN" style="font-family: Arial; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: 'Times New Roman';">Packaging costs.<o:p></o:p></span></div>
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<span lang="EN" style="font-family: 'Courier New'; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-fareast-font-family: 'Courier New';"><span style="mso-list: Ignore;">o<span style="font: 7pt 'Times New Roman';"> </span></span></span><span lang="EN" style="font-family: Arial; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: 'Times New Roman';">Work in process.<o:p></o:p></span></div>
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<span lang="EN" style="font-family: 'Courier New'; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-fareast-font-family: 'Courier New';"><span style="mso-list: Ignore;">o<span style="font: 7pt 'Times New Roman';"> </span></span></span><span lang="EN" style="font-family: Arial; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: 'Times New Roman';">Cost of inventory of finished products.<o:p></o:p></span></div>
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<span lang="EN" style="font-family: 'Courier New'; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-fareast-font-family: 'Courier New';"><span style="mso-list: Ignore;">o<span style="font: 7pt 'Times New Roman';"> </span></span></span><span lang="EN" style="font-family: Arial; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: 'Times New Roman';">Supplies for production.<o:p></o:p></span></div>
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<span lang="EN" style="font-family: 'Courier New'; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-fareast-font-family: 'Courier New';"><span style="mso-list: Ignore;">o<span style="font: 7pt 'Times New Roman';"> </span></span></span><span lang="EN" style="font-family: Arial; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: 'Times New Roman';">Direct </span><span lang="EN" style="font-family: Arial; font-size: 11pt; line-height: 150%; mso-ansi-language: EN;">overhead</span><span lang="EN" style="font-family: Arial; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: 'Times New Roman';"> costs related to production (for example, utilities and rent for manufacturing facility).<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN; mso-bidi-font-family: 'Times New Roman';">Indirect Costs:<o:p></o:p></span></b></div>
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<span lang="EN" style="font-family: Wingdings; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font: 7pt 'Times New Roman';"> </span></span></span><span lang="EN" style="font-family: Arial; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: 'Times New Roman';">Manufacturing materials and supplies.<o:p></o:p></span></div>
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<span lang="EN" style="font-family: Wingdings; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font: 7pt 'Times New Roman';"> </span></span></span><span lang="EN" style="font-family: Arial; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: 'Times New Roman';">Labor (for workers who actually touch the product).<o:p></o:p></span></div>
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<span lang="EN" style="font-family: Wingdings; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">§<span style="font: 7pt 'Times New Roman';"> </span></span></span><span lang="EN" style="font-family: Arial; font-size: 11pt; line-height: 150%; mso-ansi-language: EN; mso-bidi-font-family: 'Times New Roman';">Costs to store/wholesale the products.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Factors Impacting COGS:<o:p></o:p></span></b></div>
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<span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">The cost of goods sold can also be impacted by the type of costing methodology used to derive the cost of ending inventory. Consider the impact of the following two inventory costing methods:<o:p></o:p></span></div>
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<em><b style="mso-bidi-font-weight: normal;"><span lang="EN" style="font-family: Arial; font-size: 10pt; font-style: normal; mso-ansi-language: EN; mso-bidi-font-style: italic;">First In, First Out Method</span></b></em><b style="mso-bidi-font-weight: normal;"><span lang="EN" style="font-family: Arial; font-size: 10pt; mso-ansi-language: EN;"><o:p></o:p></span></b></div>
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<span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Under this method, known as <span style="color: windowtext;">FIFO</span>, the first unit added to inventory is assumed to be the first one used. Thus, in an inflationary environment where prices are increasing, this tends to result in lower-cost goods being charged to the cost of goods sold.<o:p></o:p></span></div>
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<em><b style="mso-bidi-font-weight: normal;"><span lang="EN" style="font-family: Arial; font-size: 10pt; font-style: normal; mso-ansi-language: EN; mso-bidi-font-style: italic;">Last In, First Out Method</span></b></em><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN" style="font-family: Arial; font-size: 10pt; mso-ansi-language: EN;"><o:p></o:p></span></i></b></div>
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<span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Under this method, known as <span style="color: windowtext;">LIFO</span>, the last unit added to inventory is assumed to be the first one used. Thus, in an inflationary environment where prices are increasing, this tends to result in higher-cost goods being charged to the cost of goods sold.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Example</span></b><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">:<o:p></o:p></span></div>
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<span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Suppose <span style="mso-spacerun: yes;"> </span>a company has $10,000 of inventory on hand at the beginning of the month, expends $25,000 on various inventory items during the month, and has $8,000 of inventory on hand at the end of the month. What was its cost of goods sold during the month? <br />The answer is:<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">Beginning inventory<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">$10,000<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">+ Purchases<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">25,000<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">- Ending inventory<o:p></o:p></span></div>
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<u><span style="font-family: Arial; font-size: 11pt;">8,000</span></u><span style="font-family: Arial; font-size: 11pt;"><o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">= Cost of goods sold<o:p></o:p></span></div>
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<u><span style="font-family: Arial; font-size: 11pt;">$27,000</span></u><span style="font-family: Arial; font-size: 11pt;"><o:p></o:p></span></div>
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<span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">The cost of goods sold can be fraudulently altered by a number of means in order to change reported profit levels, such as:<o:p></o:p></span></div>
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<li class="MsoNormal" style="margin: 0in 0in 0pt; mso-list: l4 level1 lfo1; tab-stops: list .5in; text-align: justify;"><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Altering the bill of materials and/or labor routing records in a standard costing system<o:p></o:p></span></li>
<li class="MsoNormal" style="margin: 0in 0in 0pt; mso-list: l4 level1 lfo1; tab-stops: list .5in; text-align: justify;"><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Incorrectly counting the quantity of inventory on hand<o:p></o:p></span></li>
<li class="MsoNormal" style="margin: 0in 0in 0pt; mso-list: l4 level1 lfo1; tab-stops: list .5in; text-align: justify;"><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Performing an incorrect period-end cutoff <o:p></o:p></span></li>
<li class="MsoNormal" style="color: #555555; margin: 0in 0in 0pt; mso-list: l4 level1 lfo1; tab-stops: list .5in; text-align: justify;"><span lang="EN" style="color: windowtext; font-family: Arial; font-size: 11pt; mso-ansi-language: EN;">Allocating more overhead than</span><span lang="EN" style="font-family: Arial; font-size: 11pt; mso-ansi-language: EN;"> actually exists to inventory<o:p></o:p></span></li>
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<b style="mso-bidi-font-weight: normal;"><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-family: Arial; font-size: 11pt; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">Gross Profit :<o:p></o:p></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-family: Arial; font-size: 11pt; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">Gross Profit = Gross Sales – Cost of goods sold</span></b><span style="color: #333333; font-family: Arial; font-size: 11pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Arial; font-size: 11pt;">The Gross profit must not be messed up with the operating income. In order to calculate operating income we require net income that is the different between the gross profit and operating expenses including taxes and interest payments. <o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-family: Arial; font-size: 11pt; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">Operating Profit = Gross Profit – Total operating expenses<o:p></o:p></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-family: Arial; font-size: 11pt; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">Net Profit :</span></b><span style="color: #333333; font-family: Arial; font-size: 11pt;"><o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-family: Arial; font-size: 11pt; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">Net Profit = Gross Profit – Operating Expense – Taxes – Interest Payments</span></b><span style="color: #333333; font-family: Arial; font-size: 11pt;"><o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-family: Arial; font-size: 11pt; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">Net Profit = Gross Profit – Indirect Expenses + Indirect Income</span></b><span style="color: #333333; font-family: Arial; font-size: 11pt;"><o:p></o:p></span></div>
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<span style="color: blue; font-family: Arial;"><span style="font-size: xx-small;">Source:Accountingtools.com<o:p></o:p></span></span></div>
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Anonymousnoreply@blogger.com4tag:blogger.com,1999:blog-8102870735351064242.post-38066332976229159032012-10-19T05:29:00.000-07:002012-10-19T20:42:28.433-07:00What is The Difference Between Cost and Expense<div dir="ltr" style="text-align: left;" trbidi="on">
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<strong><span style="color: #333333; font-family: Arial, Helvetica, sans-serif;">What is The Difference Between Cost and Expense:<o:p></o:p></span></strong></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;"><strong><span style="color: #333333;">Cost</span></strong><span class="apple-converted-space"><span style="color: #333333;"> :</span></span></span></h3>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong><span style="color: #333333;">Cost</span></strong><span class="apple-converted-space"><span style="color: #333333;"> </span></span><span style="color: #333333;">is the price of an asset. Sometimes it is called "Cost Basis." The cost basis of an asset includes every cost to purchase, acquire, and set up the asset, and to train employees in its use. <o:p></o:p></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><b><span style="color: #333333;">Ex:</span></b><b style="background-color: white;"><span style="color: #333333;"><o:p> </o:p></span></b></span></div>
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<span style="color: #333333; font-family: Arial, Helvetica, sans-serif;">If a manufacturing business buys a machine, the <b>Cost</b> includes shipping, set-up, and training. <o:p></o:p></span></div>
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<span style="color: #333333; font-family: Arial, Helvetica, sans-serif;">Cost basis is used to establish the basis for<span class="apple-converted-space"> </span>depreciation<span class="apple-converted-space"> </span>and other tax.<span class="apple-converted-space"> <o:p></o:p></span></span></div>
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<strong><span style="color: #333333; font-family: Arial, Helvetica, sans-serif; font-size: small;">Expense:</span></strong></h3>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: #333333;">An<span class="apple-converted-space"> </span><strong>expense</strong>,</span><span class="apple-converted-space"> is a cost that has expired or was necessary in order to earn revenues.</span><span style="color: #333333;"> An expense is an ongoing payment, like utilities, rent, payroll, and marketing. </span></span></div>
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<span style="color: #333333; font-family: Arial, Helvetica, sans-serif;">An expense is a cost of doing business. Expenses are used to produce revenue and they are deductible, reducing the business's income tax bill.<o:p></o:p></span></div>
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<span style="color: #333333;"><span style="font-family: Arial, Helvetica, sans-serif;"><b>Ex:</b></span></span></div>
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<span style="background-color: white; color: #333333;">The expense of rent is needed to have a location to sell from, to produce revenue.</span></div>
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<span style="color: #333333; font-family: Arial, Helvetica, sans-serif;">The cost of a business phone is required to take calls from customers who want to buy the business's products and services. T<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Arial, Helvetica, sans-serif;">here is usually no asset associated with an expense. Although we use the term "Cost" with expenses, they are really just payments.<o:p></o:p></span></div>
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<b style="background-color: white;"><span style="color: #333333; font-family: Arial, Helvetica, sans-serif; font-size: small;">Example : Cost Vs. Expense Explain:</span></b></h3>
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<span style="font-family: Arial, Helvetica, sans-serif;">A company has a cost of $6,000 for property insurance covering the next six months. Initially the cost of $6,000 is reported as the current asset Prepaid Insurance. However, in each of the following six months, the company will report Insurance Expense of $1,000—the amount that is expiring each month. The unexpired portion of the cost will continue to be reported as the asset Prepaid Insurance.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The cost of equipment used in manufacturing is initially reported as the long lived asset Equipment. However, in each accounting period the company will report part of the asset’s cost as Depreciation Expense.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">A retailer’s purchase of merchandise is initially reported as the current asset Inventory. When the merchandise is sold, the cost of the merchandise sold is removed from Inventory and is reported on the income statement as the expense entitled Cost of Goods Sold.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The matching principle guides accountants as to when a cost will be reported as an expense.<o:p></o:p></span></div>
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<b><span style="color: blue; font-family: Arial, Helvetica, sans-serif; font-size: xx-small;">Sources:</span></b></div>
<span style="font-family: Arial, Helvetica, sans-serif;"><span style="font-size: xx-small;"><span style="color: blue;"><span style="line-height: 17px;">Accountingcoach ,B</span><span style="background-color: white; line-height: 17px;">iztaxlaw</span></span></span></span></div>
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Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-1212059623996690082012-09-25T05:59:00.000-07:002012-10-19T05:31:56.454-07:00Basic EPS and Diluted EPS<div dir="ltr" style="text-align: left;" trbidi="on">
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Arial; font-size: 11pt;">Basic EPS Vs. Diluted EPS<o:p></o:p></span></b></div>
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<span style="font-family: Arial; font-size: 11pt;"><br />The Basic EPS<span style="mso-spacerun: yes;"> </span>is the EPS which accrues to the shareholders of the company. This is derived by dividing the net profit (after deducting dividend on preference shares) of a company by the total number of shares outstanding. <o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Arial; font-size: 11pt;">Eg:<o:p></o:p></span></b></div>
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<span style="font-family: Arial; font-size: 11pt;">Suppose <span style="mso-spacerun: yes;"> </span>if the net profit of a company = Rs 100,000 <o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">The shares outstanding are = 2,000<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Arial; font-size: 11pt;">EPS =Rs 100,000 / 2,000 = Rs 50<o:p></o:p></span></b></div>
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<span style="font-family: Arial; font-size: 11pt;">Diluted EPS which is a little more complicated than basic EPS.<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">Assuming a company needs to raise debt and it realizes that it would be able to get cheaper debt by issuing convertible bonds rather than plain vanilla bond or it decides to reward its employees with stock options instead of bonuses. <o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">In these cases, when the convertible bond is converted or stock option is purchased, it will result in increase in number of shares for the company. For existing shareholders this will result in a lower EPS accruing to them. <o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">So a diluted EPS gives what the EPS of a company would be if all convertible bonds, convertible warrants, convertible preference shares and stock options outstanding on the company’s books are converted into shares. This will give the equity share holder the correct picture when investing in the company. <o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;"><br />Hence <o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Arial; font-size: 11pt;">Diluted EPS = net profit ÷ number of shares adjusted for future dilutions</span></b><span style="font-family: Arial; font-size: 11pt;">. <o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Arial; font-size: 11pt;">Notes:</span></b><span style="font-family: Arial; font-size: 11pt;"><br />However, there are certain points to be noted when calculating diluted EPS. <br /><br />Firstly, when accounting for convertible bonds, after tax interest expense is not considered an interest expense for diluted EPS. Hence interest adjusted for tax should be added back to the net profit. <o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;"><br />Secondly, in case of convertible preference shares, the dividend has to be added back to the net profit. <o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;"><br />So the next time you are trying to figure out if a stock is cheap by calculating its price to earnings ratio (PE ratio) make sure that the denominator is diluted EPS.<o:p></o:p></span></div>
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<span style="font-family: Arial;"><span style="color: blue;"><span style="font-size: x-small;"><strong>Sources:<o:p></o:p></strong></span></span></span></div>
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<span style="font-family: Arial;"><span style="color: blue;"><span style="font-size: x-small;">Thefinanceconcept.com<o:p></o:p></span></span></span></div>
<span style="font-family: Arial; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: 'Times New Roman'; mso-fareast-language: EN-US;"><span style="color: blue; font-size: x-small;">Equitymaster.com</span></span></div>
Anonymousnoreply@blogger.com1tag:blogger.com,1999:blog-8102870735351064242.post-63424945859443317232012-09-25T05:57:00.002-07:002012-09-25T05:57:43.498-07:00Diluted EPS <div dir="ltr" style="text-align: left;" trbidi="on">
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Arial; font-size: 11pt;">Basic EPS<span style="mso-spacerun: yes;"> </span>:<o:p></o:p></span></b></div>
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<span style="font-family: Arial; font-size: 11pt;">The Basic EPS is the EPS which accrues to the shareholders of the company. This is derived by dividing the net profit (after deducting dividend on preference shares) of a company by the total number of shares outstanding. <o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Arial; font-size: 11pt;">Diluted EPS:<o:p></o:p></span></b></div>
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<span style="font-family: Arial; font-size: 11pt;">Diluted EPS is derived by dividing the total earnings by the number of shares that would be outstanding if the holders of equity warrants, convertible bonds, convertible preferred shares and stock options, exercise their options to obtain common shares. It is known as diluted EPS because of the proportional reduction in the ownership interest because of the issuance of new common shares.<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">For example, if the holder of convertible bond exercises his options to obtain common shares, than it will affect both the numerator and denominator of the EPS formula.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: Arial; font-size: 11pt;">EPS = Total earnings / Weighted average number of outstanding shares<o:p></o:p></span></b></div>
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<span style="font-family: Arial; font-size: 11pt;">So when the holder exercise the option, the company is now not liable to pay interest to the holder, which will increase the total earnings (numerator) and the company will issue number of common shares to bond holders, which will increase the denominator. But the investor does have to calculate basic or diluted EPS. The companies report these figures along with the details of EPS computation in the footnotes of financial statements.<o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">A big difference in basic and diluted EPS can indicate the presence of high potential of dilutive securities. The diluted EPS is lesser than the basic EPS since the number of share increases while calculating diluted EPS. <o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">Due to this, the trailing P/E calculated on the basis of diluted EPS is higher than the trailing P/E calculated on the basis of basic EPS and the stock looks overvalued or expensive. But investors should prefer to use diluted EPS for calculating trailing P/E ratio as it makes the comparison among companies with difference amount of dilutive securities easier and relevant. <o:p></o:p></span></div>
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<span style="font-family: Arial; font-size: 11pt;">Second major benefit of using diluted EPS is that it shows the worst case scenario. If dilutive securities holder exercise their option due to any reason, than the common investor will be on safe side. Third reason why an investor should use diluted EPS is because major well known experts, research analyst and brokers use diluted EPS for calculating trailing P/E.</span></div>
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<span style="font-family: Arial;"><strong><span style="color: blue; font-size: x-small;">Source:</span></strong></span></div>
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<span style="font-family: Arial;"><span style="color: blue;"><span style="font-size: x-small;">Thefinanceconcept.com<o:p></o:p></span></span></span></div>
<o:p></o:p></span></div>
Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-28465166254909155452012-07-21T06:37:00.006-07:002012-09-13T16:33:34.135-07:00Discounted Cash Flow (DCF) Analysis<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial, Helvetica, sans-serif;"><b>Discounted Cash Flow (DCF)</b> is a cash flow summary adjusted so as to reflect the <b>time value of money</b>. With DCF, money to be received or paid at some time in the future is viewed as having less value, today, than than an equal amount that is received or paid today.</span></div>
<ul style="line-height: 18px; list-style-type: square; margin: 15px 0px 15px 25px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><b>Present value</b> (<b>PV</b>) is what the future cash flow is worth <i>today. </i><b>Futue value</b> (<b>FV</b>) is the value, in non discounted currency units that actually flows in or out at the future time. A $100 cash inflow that will arrive two years from now could, for example, have a present value today of about $94, while its future value is still considered $100. The present value is <b>discounted</b> below the future value. </span></li>
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">The longer the time period before an actual cash flow event occurs, the more the present value of future money is discounted below its future value.</span></li>
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">The total discounted value (present value) for a series of cash flow events across a time period extending into the future is known as the <b>net present value </b>(<b>NPV</b>)<b> </b>of a <b>cash flow stream.</b> </span></li>
</ul>
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<span style="font-family: Arial, Helvetica, sans-serif;">DCF can be an important factor when evaluating or comparing investments, proposed actions, or purchases. Other things being equal, the action or investment with the larger DCF is the better decision. When discounted cash flow events in a cash flow stream are added together, the result is called the n<b>et present value (NPV).</b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><b>DCF</b> and <b>NPV</b> and related<b> time value of money</b> concepts are more easily understood when explained together and illustrated, along with related concepts such as <b>discount rate</b>,<b>future value</b> (<b>FV</b>), and <b>present value</b> (<b>PV</b>), as shown in the sections below.</span></div>
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<h2 id="timevalue" style="color: #b26b00; line-height: 18px; margin-top: 20px; text-align: justify;">
<span style="color: blue; font-family: Arial, Helvetica, sans-serif; font-size: small;">Time value of money in finance and business planning:</span></h2>
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<span style="font-family: Arial, Helvetica, sans-serif;">When business case or investment projections extend more than a year into the future, professionals trained in finance usually want to see cash flows in both discounted terms and non discounted terms. They want to see projections, that is, that consider the time value of money. In modern finance, time-value-of-money concepts play a central role in decision support and planning.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Time value of money analysis begins with the<b> present value</b> concept, the idea that money you have now is worth more, today, than an identical amount you would receive in the future Why? There are at least 3 reasons:</span></div>
<ul style="line-height: 18px; list-style-type: square; margin: 15px 0px 15px 25px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><b>Opportunity</b>. The money you have now you could (in principle) invest now, and gain return or interest, between now and the future time. Money you will not have until a future time cannot be used now. </span></li>
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><b>Risk.</b> Money you have now is not at risk. Money predicted to arrive in the future is less certain.</span></li>
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><b>Inflation</b>. A sum you have today will very likely buy more than an equal sum you will not have until years in future. Inflation over time reduces the buying power of money.</span></li>
</ul>
<h2 id="PV_FV_NPV" style="color: #b26b00; line-height: 18px; margin-top: 20px; text-align: justify;">
<span style="color: blue; font-family: Arial, Helvetica, sans-serif; font-size: small;">Present value, future value, and net present value:</span></h2>
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<span style="font-family: Arial, Helvetica, sans-serif;">What future money is worth today is called its <b>present value (PV), </b>and what it will be worth in the future when it finally arrives is called not surprisingly its<b><i> </i>future value (FV)</b>. The right to receive a payment one year from now for $100 (the future value) might be worth to us <i>today</i>$95 (its present value). Present value is <b>discounted</b> below future value.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">When the analysis concerns a series of cash inflows or outflows coming at different future times, the series is called a <b>cash flow stream</b>. Each future cash flow has its own value today (its own present value). The sum of these present values is the <b>net present value</b> for the cash flow stream. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Consider an investment today of $100, that brings net gains of $100 each year for 6 years. The future values and present values of these cash flow events might look like this:</span></div>
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<span style="line-height: 18px;"><img alt="Cash Flow stream showing discounted and non discounted values" hspace="110" src="http://www.solutionmatrix.com/images/FV_PV_NPV.jpg" style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; float: left; margin: 0px 100px 5px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;" title="Cash Flow stream showing discounted and non discounted values" /></span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 18px; text-align: justify;">All three sets of bars represent the same investment cash flow stream. The black bars stand for cash flow figures in the currency units when they actually appear in the future (future values). </span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 18px; text-align: justify;">The lighter bars are values of those cash flows </span><i style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 18px; text-align: justify;"><b>now</b></i><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 18px; text-align: justify;">, in present value terms. The net values in the legend show that after five years, the net cash flow expected is $500, but the Net present value today is discounted to something less.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">The size of the discounting effect depends on two things: the amount of time between now and each future payment (the number of discounting periods) and an interest rate called the <b>discount rate. </b>The example shows that:</span></div>
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<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">As the number of discounting periods between now and the cash arrival increases, the present value decreases.</span></li>
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">As the discount rate (interest rate) in the present value calculations increases, the present value decreases. </span></li>
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<span style="font-family: Arial, Helvetica, sans-serif;">Whether you will or will not calculate present values yourself, your ability to use and interpret NPV / DCF figures will benefit from a simple understanding of the way that interest rates and discounting periods work together in discounting. </span></div>
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<h2 id="math" style="color: #b26b00; font-family: Arial, Verdana, Helvetica, sans-serif; margin-top: 20px; text-align: justify;">
<span style="color: blue; font-size: small;">DCF and NPV: Mathematically speaking</span></h2>
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<img alt="How future value is calculated: Algebraic formula for FV" src="http://www.solutionmatrix.com/images/FVformula.jpg" style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; float: left; margin: 0px 15px 5px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;" title="How future value is calculated: Algebraic formula for FV" /></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">DCF and NPV calculations are closely related to</span><span style="background-color: white;">calculations for interest growth</span><span style="background-color: white;"> </span><span style="background-color: white;">and compounding, which are already familiar to most people.</span><b style="background-color: white;"> </b><span style="background-color: white;">Remember briefly how these work. The formula at left looks into the future and might ask, for instance: What is the future value (FV) in one year, of $100 invested today (the PV), at an annual interest rate of 5%?</span></span></div>
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FV<sub>1</sub> = $100 ( 1 + 0.05)<sup>1</sup> = $105</div>
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When the FV is more than one period into the future, as most people know, interest compounding takes place. Interest earned in earlier periods begins to earn interest on itself, in addition to interest on the original PV. Compound interest growth is delivered by the exponent in the FV formula, showing the number of periods. What is the future value in five years of $100 invested today at an annual interest rate of 5%?</div>
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FV<sub>5</sub> = $100 ( 1 + 0.05)<sup>5</sup> = $128</div>
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<img alt="How present value is calculated: Algebraic formula for PV" src="http://www.solutionmatrix.com/images/PVformula.jpg" style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; float: left; margin: 0px 15px 5px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;" title="How present value is calculated: Algebraic formula for PV" /></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">The same formula can be rearranged to deliver a present value given a future value and interest rate for input, as shown at left. Now, the formula starts in the future and looks</span><span style="background-color: white;"> </span><i style="background-color: white;">backwards</i><span style="background-color: white;"> </span><span style="background-color: white;">in time, to today, and might ask: What is the value today of a $100 payment arriving in one year, using a discount rate of 5%?</span></span></div>
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<div style="font-family: Arial, Verdana, Helvetica, sans-serif; margin-bottom: 10px; text-align: justify;">
PV<sub>1</sub> = ($100) / (1.0 + 0.05)<sup>1 </sup> = $100 / (1.05) = $95 </div>
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You should be able to see why PV will decrease if we either (a) increase the interest rate, or (b) increase the number of periods before the FV arrives. What is the present value of $100 we will receive in 5 years, using a 5% discount rate?</div>
<div style="font-family: Arial, Verdana, Helvetica, sans-serif; margin-bottom: 10px; text-align: justify;">
PV<sub>5 </sub> = $100 / (1.0 +0.05)<sup>5</sup> = $100 / (1.276) = $75.13</div>
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When discounting is applied to a series of cash flow events, a cash flow stream, as illustrated in the graph example above, net present value for the stream is the sum of PVs for each FV:</div>
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<img alt="How net present value is calculated with year end discounting: Algebraic formula for NPV" src="http://www.solutionmatrix.com/images/NPV_5.jpg" style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; float: left; margin: 0px 15px 5px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;" title="How net present value is calculated with year end discounting: Algebraic formula for NPV" /></div>
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Finally, note two commonly used variations on the examples shown thus far. The examples above and most textbooks show "year end" discounting, with periods one year in length, and cash inflows and outflows discounted as though all cash flows in the year occur on day 365 of the year. However:</div>
<ul style="font-family: Arial, Verdana, Helvetica, sans-serif; list-style-type: square; margin: 15px 0px 15px 25px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: left;">
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Some financial analysts prefer to assume that cash flows are distributed more or less evenly throughout the period, and discounting should be applied when the cash actually flows.</li>
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<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">For calculating present values this way, it is mathematically equivalent to calculate as though all cash flow occurs at mid year. This is so-called "mid period discounting." </li>
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Year end discounting is more severe (has a greater discount effect) than mid year (mid period) discounting, because the former discounts all cash flow in the period for the full period.</li>
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<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">When actual cash flow is known or estimated for months, quarters, or some other period, discounting may be performed for each of these periods rather than for one year periods. In such cases, the discount rate used for calculation is the annual rate divided by the fraction of a year covered by a period. Quarterly discounting, for example, would use the annual rate divided by 4.</li>
</ul>
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<img alt="Net Present Value Calculations Mid Year discounting quarterly discounting" src="http://www.solutionmatrix.com/images/NPV_6.jpg" style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; float: left; margin: 0px 15px 5px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;" title="Net Present Value Calculations Mid Year discounting quarterly discounting" /><img alt="Discounted cash flow and NPV formula key." src="http://www.solutionmatrix.com/images/NPVKey.jpg" style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; float: left; margin: 0px 15px 5px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;" title="Discounted cash flow and NPV formula key." /></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">The formulas at left show NPV calculations for mid-year discounting (upper formula) and for discounting with periods other than one year (lower formula).</span></div>
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In any case, the business analyst will want to find out which of the above discount methods is preferred by the organization's financial specialists, and why, and follow their practice (unless there is justification for doing otherwise).</div>
<div style="font-family: Arial, Verdana, Helvetica, sans-serif; margin-bottom: 10px; text-align: justify;">
Working examples of these formulas, along with guidance for spreadsheet implementation and good-practice usage are available in the spreadsheet-based toolFinancial Metrics Pro.</div>
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<h2 id="choosing" style="color: #b26b00; font-family: Arial, Verdana, Helvetica, sans-serif; line-height: 18px; margin-top: 20px; text-align: justify;">
<span style="color: blue; font-size: small;">Choosing a discount rate for discounted cash flow analysis:</span></h2>
<div style="font-family: Arial, Verdana, Helvetica, sans-serif; line-height: 18px; margin-bottom: 10px; text-align: justify;">
The analyst will also want to find out from the organization's financial specialists which discount rate the organization uses for discounted cash flow analysis. Financial officers who have been with an organization for some time, usually develop good reasons for choosing one rate or another as the most appropriate rate for the organization.</div>
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<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">In private industry, many companies use their own cost of capital (or weighted average cost of capital) as the preferred discount rate.</li>
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Government organizations typically prescribe a discount rate for use in the organization's planning and decision support calculations. In the United States, for instance, the Office of Management and Budget (OMB) publishes a quarterly circular with prescribed discount rates for Federal Government use.</li>
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Financial officers may use a higher discount rate for investments or decisions viewed as risky, and a lower discount rate when expected returns from a proposed action are seen as less risky. The higher rate is viewed as a hedge against risk, because it puts relatively more emphasis (weight) on near-term returns compared to distant future returns.</li>
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<h2 id="example" style="color: #b26b00; font-family: Arial, Verdana, Helvetica, sans-serif; line-height: 18px; margin-top: 20px; text-align: justify;">
<span style="color: blue; font-size: small;">Example: Comparing competing investments with NPV.</span></h2>
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Consider two competing investments in computer equipment. Each calls for an initial cash outlay of $100, and each returns a total a $200 over the next 5 years making net gain of $100. But the timing of the returns is different, as shown in the table below (Case A and Case B), and therefore the present value of each year’s return is different. The sum of each investment’s present values is called the discounted cash flow (DCF) or net present value (NPV). Using a 10% discount rate again, we find:</div>
<table border="1" cellpadding="5" style="border-collapse: collapse; color: black; font-family: Arial, Verdana, Helvetica, sans-serif; line-height: 18px; text-align: justify; width: 500px;"><tbody>
<tr><th rowspan="2" scope="col" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"><br />
Timing</th><th colspan="2" scope="col" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> CASE A</th><th colspan="2" scope="col" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> CASE B</th></tr>
<tr><th scope="col" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; text-align: left; vertical-align: top;"> Net Cash Flow</th><th scope="col" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; text-align: left; vertical-align: top;"> Present Value</th><th scope="col" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; text-align: left; vertical-align: top;"> Net Cash Flow</th><th scope="col" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; text-align: left; vertical-align: top;"> Present Value</th></tr>
<tr><th scope="row" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;">Now</th><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> – $100.00</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> – $100.00</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> – $100.00</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> – $100.00</td></tr>
<tr><th scope="row" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;">Year 1</th><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $60.00</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $54.54</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $20.00</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $18.18</td></tr>
<tr><th scope="row" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;">Year 2</th><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $60.00</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $49.59</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $20.00</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $16.52</td></tr>
<tr><th scope="row" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;">Year 3</th><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $40.00</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $30.05</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $40.00</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $30.05</td></tr>
<tr><th scope="row" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;">Year 4</th><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $20.00</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $13.70</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $60.00</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $41.10</td></tr>
<tr><th scope="row" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;">Year 5</th><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $20.00</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $12.42</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $60.00</td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> $37.27</td></tr>
<tr><th scope="row" style="background-color: #e0a800; border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;">Total</th><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> <b>Net CF<sub>A</sub> =</b> <b> $100.00</b></td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> <b>NPV<sub>A</sub> = $60.30</b></td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"> <b>Net CF<sub>B</sub> = $100.00</b></td><td style="border-bottom: rgb(204,202,202) 1px solid; border-left: rgb(204,202,202) 1px solid; border-right: rgb(204,202,202) 1px solid; border-top: rgb(204,202,202) 1px solid; padding-bottom: 5px; padding-left: 2px; padding-right: 2px; padding-top: 5px; vertical-align: top;"><b> NPV<sub>B</sub> = $43.12</b></td></tr>
</tbody></table>
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<span style="font-family: Arial, Verdana, Helvetica, sans-serif; line-height: 18px;"><br /></span></div>
<span style="font-family: Arial, Verdana, Helvetica, sans-serif; line-height: 18px;"></span><br />
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<span style="font-family: Arial, Verdana, Helvetica, sans-serif; line-height: 18px;"><span style="background-color: white;">Comparing the two investments, the larger early returns in Case A lead to a better net present value (NPV) than the later large returns in Case B. Note especially the </span><i style="background-color: white;">Total</i><span style="background-color: white;"> line for each present value column in the table. This total is the net present value (NPV) of each "cash flow stream." When choosing alternative investments or actions, other things being equal, the one with the higher NPV is the better investment.</span></span></div>
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<h2 id="summary" style="color: #b26b00; font-family: Arial, Verdana, Helvetica, sans-serif; line-height: 18px; margin-top: 20px; text-align: justify;">
<span style="color: blue; font-size: small;">When to use DCF and NPV in the business case:</span></h2>
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In brief, an NPV / DCF view of the cash flow stream should probably appear with a business case summary when:</div>
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<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">The business case deals with an "investment" scenario of any kind, in which different uses for money are being compared.</li>
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">The business case covers long periods of time (two or more years).</li>
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Inflows and outflows change differently over time (e.g., the largest inflows come at a different time from the largest outflows).</li>
<li style="line-height: 15px; margin: 10px 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Two or more alternative cases are being compared and they differ with respect to cash flow timing within the analysis period.</li>
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<span style="color: blue; font-size: x-small;"><span style="font-family: Arial, Verdana, Helvetica, sans-serif; line-height: 15px;">Source :</span><span style="background-color: white; line-height: 15px; text-align: left;"><span style="font-family: Arial, Verdana, Helvetica, sans-serif;">solutionmatrix.com</span></span></span></div>
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Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-15884593056266703812012-07-21T06:22:00.001-07:002012-07-21T06:27:17.774-07:00Deferred Revenue Expenditure<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 17px; font-weight: bold; line-height: 19px;">Deferred Revenue Expenditure:</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="line-height: 19px;">Simply an expenditure of revenue nature is a </span><span style="background-color: white; line-height: 19px;">Deferred Revenue Expenditure<b> and the </b></span></span><span style="font-family: Arial, Helvetica, sans-serif; line-height: 19px;"> benefit of a revenue expenditure may be available for period of two or three or even more years. Such expenditure is then known as </span><span style="font-family: Arial, Helvetica, sans-serif; font-weight: bold; line-height: 19px;">"Deferred Revenue Expenditure"</span><span style="font-family: Arial, Helvetica, sans-serif; line-height: 19px;"> and is written off over a period of a few years and not wholly in the year in which it is incurred. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; line-height: 19px;"><br /></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; line-height: 19px;"><b>For example</b>, a new firm may advertise very heavily in the beginning to capture a position in the market. The benefit of this advertising campaign will last quite a few years. It will be better to write off the expenditure in there or four and not in the first year.</span></div>
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<span style="background-color: white; line-height: 18px; text-align: -webkit-auto;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 18px; text-align: -webkit-auto;"><b>Accounting Treatment: </b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="line-height: 18px;">Deferred revenue expenditure is the expenditure which is originally revenue in nature but </span></span><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 18px;">the amount spent is so large that the benefit is received for not a year but for many years. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="line-height: 18px;">A proportionate amount is charged to profit and loss account of each year and balance is </span></span><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 18px;">carried forward to subsequent years as deferred revenue expenditure. It is shown as an </span><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 18px;">asset in the balance sheet, e.g., heavy expenditure incurred on advertisements. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="line-height: 18px;"><br /></span></span></div>
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<span style="color: #282828; line-height: 19px;"><span style="font-family: Arial, Helvetica, sans-serif;">Heavy advertisement expenses , because this is for promotion of sale so, it is revenue expenses but because amount is too large so it is also capital expenditure. Now, it will include in deferred revenue expenditure. </span></span></div>
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<span style="color: #282828; line-height: 19px;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></span><br />
<span style="color: #282828; line-height: 19px;"><span style="font-family: Arial, Helvetica, sans-serif;"><b>Example:</b></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: #282828; line-height: 19px;">If we fix the target of getting benefit for this advertisement is </span><strong style="color: #282828; line-height: 19px; margin: 0px; padding: 0px;">10 years</strong><span style="color: #282828; line-height: 19px;"> and advertising cost</span><strong style="color: #282828; line-height: 19px; margin: 0px; padding: 0px;"> $ 500000</strong><span style="color: #282828; line-height: 19px;">. Now</span><strong style="color: #282828; line-height: 19px; margin: 0px; padding: 0px;"> $ 500000</strong><span style="color: #282828; line-height: 19px;"> is divided by</span><strong style="color: #282828; line-height: 19px; margin: 0px; padding: 0px;">10 years</strong><span style="color: #282828; line-height: 19px;"> and we get</span><strong style="color: #282828; line-height: 19px; margin: 0px; padding: 0px;"> $ 50000</strong><span style="color: #282828; line-height: 19px;"> and it will show as revenue expense which is debited to profit and loss account and balance amount of </span><strong style="color: #282828; line-height: 19px; margin: 0px; padding: 0px;">$ 450000</strong><span style="color: #282828; line-height: 19px;"> will show in balance sheet as a fictitious asset. </span></span><span style="background-color: white;"><span style="font-family: Arial, Helvetica, sans-serif;"> i.e., although it is shown on the assets side if the balance sheet, it is not really an asset at all.</span></span></div>
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<span style="color: #282828; line-height: 19px;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: #282828; line-height: 19px;">Every year one tenth part of </span><strong style="color: #282828; line-height: 19px; margin: 0px; padding: 0px;">Original and total advertising expenses</strong><span style="color: #282828; line-height: 19px;"> will go to profit and loss account. This deferred revenue account will close in </span><strong style="color: #282828; line-height: 19px; margin: 0px; padding: 0px;">10th year when there will not be any balance for showing as asset in balance sheet </strong><span style="color: #282828; line-height: 19px;">.</span></span>
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</div>Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-23125347235638843412012-07-18T06:22:00.001-07:002012-07-18T23:48:51.706-07:00Meaning of "Holding Company” and “Subsidiary” as per Companies Act, 1956<div dir="ltr" style="text-align: left;" trbidi="on">
<span class="Apple-style-span" style="background-color: #dce1e2;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i></i></span></span><br />
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b>Simple Definitions:</b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Holding Company:</strong></span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><em>A holding company is a parent company that owns enough voting stock(more than 50%) in a subsidiary to make management decisions , influence and contorl the company's board of directors. </em></span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><em>However, holding companies that control 80% or more of the subsidiary's voting stock gain the benefits of tax consolidation, which include tax-free dividends for the parent company and the ability to share operating losses. </em></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><em><strong>Subsidiary Company :</strong></em></span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><em>A subsidiary is a company that is controlled by a holding company or parent; this means at least 50% of its stock is controlled by another company. This 50% or greater stake gives the parent company control.</em></span><br />
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b>Legal Definitions As per as per Companies Act, 1956 :</b></span><br />
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i><b>Indian Company :</b></i></span><br />
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i><b>Section 2(26)-</b> “Indian company” means a company formed and registered under the Companies Act, 1956 (1 of 1956), and includes- </i></span><br />
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<center><table border="0" bordercolor="#111111" cellpadding="5" cellspacing="0" id="AutoNumber3" style="border-collapse: collapse;"><tbody>
<tr><td valign="top" width="2%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(i)</span></td><td valign="top" width="98%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">a company formed and registered under any law relating to companies formerly in force in any part of India (other than the State of Jammu and Kashmir and the Union territories specified in sub-clause (iii) of this clause);</span></div>
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<tr><td valign="top" width="2%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(ia)</span></td><td valign="top" width="98%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">a corporation established by or under a Central, State or Provincial Act;</span></td></tr>
<tr><td valign="top" width="2%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(ib)</span></td><td valign="top" width="98%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">any institution, association or body which is declared by the Board to be a company under clause (17) <b>***</b> ;</span></div>
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<tr><td valign="top" width="2%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(ii)</span></td><td valign="top" width="98%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">in the case of the State of Jammu and Kashmir, a company formed and registered under any law for the time being in force in that State;</span></div>
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<tr><td valign="top" width="2%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(iii)</span></td><td valign="top" width="98%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">in the case of any of the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry, a company formed and registered under any law for the time being in force in that Union territory. </span></div>
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i>Provided that the registered or, as the case may be, principal office of the company, corporation, institution, association or body in all cases is in India; </i></span></div>
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i><br /></i></span></div>
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i>*** <b>Section 2(17)</b> “company” means-</i></span></div>
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<center><table border="0" bordercolor="#111111" cellpadding="5" cellspacing="0" id="AutoNumber5" style="border-collapse: collapse;"><tbody>
<tr><td width="1%">(<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">i)</span></td><td width="99%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">any Indian company, or</span></td></tr>
<tr><td width="1%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(ii)</span></td><td width="99%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">any body corporate incorporated by or under the law of a country outside India, or</span></td></tr>
<tr><td width="1%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(iii)</span></td><td width="99%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income-tax Act, 1922 (11 of 1922), or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1<sup>st</sup> day of April, 1970, or</span></div>
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<tr><td width="1%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(iv)</span></td><td width="99%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company:</span></div>
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i><b>Provided </b>that such institution, association or body shall be deemed to be a company only for such assessment year or assessment years (whether commencing before the 1<sup>st</sup> day of April, 1971, or on or after that date) as may be specified in the declaration;</i></span></div>
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i><b><br /></b></i></span></div>
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i><b>Foreign company :</b></i></span></div>
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i><b>Section 2(23A) -“</b>foreign company” means a company which is not a domestic company<b><u><span style="text-decoration: none;"> </span></u></b></i></span></div>
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i><b>Definitions as per Companies Act, 1956</b> <b>:</b></i></span></div>
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i><b><br /></b></i></span></div>
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i><b>Meaning of holding company” and “subsidiary” </b> </i></span><br />
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i><b>Section 4</b> – </i></span></div>
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><i>(1) For the purposes of this Act, a company shall, subject to the provisions of sub-section (3), be deemed to be a <b>subsidiary</b> of another if, but only if,- </i></span></div>
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<center><table border="0" bordercolor="#111111" cellpadding="5" cellspacing="0" id="AutoNumber6" style="border-collapse: collapse;"><tbody>
<tr><td width="5%"></td><td width="3%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(a)</span></td><td colspan="2" width="92%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">that other controls the composition of its Board of directors; or</span></td></tr>
<tr><td width="5%"></td><td width="3%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(b)</span></td><td colspan="2" width="92%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">that the other exercises or controls more than one-half of its total voting power in a case where it has issued securities and such securities have the same voting rights as equity shares; or</span></div>
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<tr><td width="5%"></td><td width="3%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(c)</span></td><td colspan="2" width="92%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">that the other holds more than one-half in value of its paid-up capital, in any other case; </span></td></tr>
<tr><td width="5%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(1A)</span></td><td colspan="3" width="95%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">No company which is a <b>subsidiary</b> of another company shall, after the commencement of the Companies (Amendment) Act, 2003, become a <b>holding </b>company;</span></div>
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<tr><td width="5%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(2)</span></td><td colspan="3" width="95%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">For the purposes of sub-section (1), the composition of a company’s Board of directors shall be deemed to be controlled by another company if, but only if, that other company by the exercise of some power exercisable by it at its discretion without the consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorships; but for the purposes of this provision that other company shall be deemed to have power to appoint to a directorship with respect to which any of the following conditions is satisfied, that is to say- </span></div>
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<tr><td width="5%"></td><td width="3%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(a)</span></td><td colspan="2" width="92%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">that a person cannot be appointed thereto without the exercise in his favour by that other company of such a power as aforesaid; </span></div>
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<tr><td width="5%"></td><td width="3%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(b)</span></td><td colspan="2" width="92%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">that a person’s appointment thereto follows necessarily from his appointment as director or manager of, or to any other office or employment in, that other company, or </span></div>
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<tr><td width="5%"></td><td width="3%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(c)</span></td><td colspan="2" width="92%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">that the directorship is held by an individual nominated by that other company or a <b>subsidiary </b>thereof. </span></div>
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<tr><td width="5%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(3)</span></td><td colspan="3" width="95%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">In determining whether one company is a <b>subsidiary</b> of another- </span></td></tr>
<tr><td width="5%"></td><td width="3%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(a)</span></td><td colspan="2" width="92%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">any shared held or power exercisable by that other company in a fiduciary capacity shall be treated as not held or exercisable by it; </span></div>
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<tr><td width="5%"></td><td width="3%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(b)</span></td><td colspan="2" width="92%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">subject to the provisions of clauses (c) and (d), any shares held or power exercisable – </span></div>
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<tr><td width="5%"></td><td width="3%"></td><td width="3%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(i)</span></td><td width="89%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">by any person as a nominee for that other company (except where that other is concerned only a fiduciary capacity); or</span></div>
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<tr><td width="5%"></td><td width="3%"></td><td width="3%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(ii)</span></td><td width="89%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">by, or by a nominee for, a <b>subsidiary</b> of that other company, not being a <b>subsidiary</b> which is concerned only in a fiduciary capacity; </span></div>
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<tr><td width="5%"></td><td width="3%"></td><td colspan="2" width="92%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">shall be treated as held or exercisable by that other company; </span></td></tr>
<tr><td width="5%"></td><td width="3%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(c)</span></td><td colspan="2" width="92%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">any shares held or power exercisable by any person by virtue of the provisions of any debentures of the first-mentioned company or of a trust deed for securing any issue of such debentures shall be disregarded; </span></div>
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<tr><td width="5%"></td><td width="3%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(d)</span></td><td colspan="2" width="92%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">any shares held or power exercisable by, or by a nominee for, that other or its <b>subsidiary</b> not being held or exercisable as mentioned in clause(c) shall be treated as not held or exercisable by that other, if the ordinary business of that other or its <b>subsidiary</b>, as the case may be, includes the lending of money and the shares are held or the power is exercisable as foresaid by way of security only for the purposes of a transaction entered into in the ordinary course of that business. </span></div>
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<tr><td width="5%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(4)</span></td><td colspan="3" width="95%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">For the purposes of this Act, a company shall be deemed to be the <b>holding company</b> of another if, but only, if that other is its <b>subsidiary</b>. </span></div>
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<tr><td width="5%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(5)</span></td><td colspan="3" width="95%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">In this section, the expression “company” includes any body corporate, and the expression “equity share capital” has the same meaning as in sub-section (2) of section 85. </span></div>
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<tr><td width="5%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(6)</span></td><td colspan="3" width="95%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">In the case of a body corporate which is incorporated in a country outside India, a <b>subsidiary</b> or <b>holding</b> company of the body corporate under the law of such country shall be deemed to be a <b>subsidiary</b> or <b>holding</b> company of the body corporate within the meaning and for the purposes of this Act also, whether the requirements of this section are fulfilled or not. </span></div>
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<tr><td width="5%"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">(7)</span></td><td colspan="3" width="95%"><div align="justify">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">A private company, being a <b>subsidiary</b> of a body corporate incorporated outside India, which, if incorporated in India, would be a public company within the meaning of this Act, shall be deemed for the purposes of this Act to be a <b>subsidiary</b> of a public company if not less than ninety-nine per cent. of the share capital in that private company is not held by that body corporate whether alone or together with one or more other bodies corporate incorporated outside India. </span></div>
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</center><center><br /></center><center style="text-align: left;"><span class="Apple-style-span" style="color: blue;">Source : <a href="http://www.cbec.gov.in/aar/definitions.htm">http://www.cbec.gov.in/aar/definitions.htm</a></span></center><center><div style="text-align: left;">
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</div>Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-1955513743820553902012-07-16T23:50:00.000-07:002012-09-25T07:32:27.672-07:00Depriciation Analysis<div dir="ltr" style="text-align: left;" trbidi="on">
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<strong><span style="font-family: Arial, Helvetica, sans-serif;">Why depreciation is a Non Cash Expense?, Why Reserve Maintained for Depreciation ? , Why Depreciation expense needs to be added back to Net Income in Cash Flow.</span></strong><br />
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<strong><span style="font-family: Arial, Helvetica, sans-serif;">Definition of Depreciation:</span></strong></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Financial Reporting Standard 15 (covering the accounting for tangible fixed assets) defines depreciation as follows:</span></div>
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<em><span style="color: #0000cc; font-family: Arial, Helvetica, sans-serif;">"The wearing out, using up, or other reduction in the useful economic life of a tangible fixed asset whether arising from use, effluxion of time or obsolescence through either changes in technology or demand for goods and services produced by the asset.'</span></em></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">A portion of the benefits of the fixed asset will be used up or consumed in each accounting period of its life in order to generate revenue. To calculate profit for a period, it is necessary to match expenses with the revenues they help earn.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">In determining the expenses for a period, it is therefore important to include an amount to represent the consumption of fixed assets during that period (that is, depreciation).</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In essence, depreciation involves allocating the cost of the fixed asset (less any residual value) over its useful life. To calculate the depreciation charge for an accounting period, the following factors are relevant:</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">- the cost of the fixed asset;</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">- the (estimated) useful life of the asset;</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">- the (estimated) residual value of the asset.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<strong><span style="font-family: Arial, Helvetica, sans-serif;">What is the relevant cost of a fixed asset?</span></strong></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The cost of a fixed asset includes all amounts incurred to acquire the asset and any amounts that can be directly attributable to bringing the asset into working condition.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Directly attributable costs may include:</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">- Delivery costs</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">- Costs associated with acquiring the asset such as stamp duty and import duties</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">- Costs of preparing the site for installation of the asset</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">- Professional fees, such as legal fees and architects' fees</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Note that general overhead costs or administration costs would not be included as part of the total costs of a fixed asset (e.g. the costs of the factory building in which the asset is kept, or the cost of the maintenance team who keep the asset in good working condition)</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The cost of subsequent expenditure on a fixed asset will be added to the cost of the asset provided that this expenditure enhances the benefits of the fixed asset or restores any benefits consumed.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">This means that major improvements or a major overhaul may be capitalised and included as part of the cost of the asset in the accounts.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">However, the costs of repairs or overhauls that are carried out simply to maintain existing performance will be treated as expenses of the accounting period in which the work is done, and charged in full as an expense in that period.</span></div>
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<strong><span style="font-family: Arial, Helvetica, sans-serif;">What is the Useful Life of a fixed asset?</span></strong></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">An asset may be seen as having a physical life and an economic life.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Most fixed assets suffer physical deterioration through usage and the passage of time. Although care and maintenance may succeed in extending the physical life of an asset, typically it will, eventually, reach a condition where the benefits have been exhausted.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">However, a business may not wish to keep an asset until the end of its physical life. There may be a point when it becomes uneconomic to continue to use the asset even though there is still some physical life left.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The economic life of the asset will be determined by such factors as technological progress and changes in demand. For purposes of calculating depreciation, it is the estimated economic life rather than the potential physical life of the fixed asset that is used.</span></div>
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<strong><span style="font-family: Arial, Helvetica, sans-serif;">What about the Residual Value of a fixed asset?</span></strong></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">At the end of the useful life of a fixed asset the business will dispose of it and any amounts received from the disposal will represent its residual value. This, again, may be difficult to estimate in practice. However, an estimate has to be made. If it is unlikely to be a significant amount, a residual value of zero will be assumed.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The cost of a fixed asset less its estimated residual value represents the total amount to be depreciated over its estimated useful life.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Depreciation of fixed assets :</strong><strong>Introduction</strong></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">In our <span style="color: #1549b2;"><span style="color: black;">introduction to accounting for fixed assets</span>,</span> we described how businesses need to account for the consumption of fixed assets over time in a way that reflects their reducing value. The term given to this consumption is depreciation. This revision note explains the various methods available to calculate depreciation and highlights how subjective this calculation can be. Other revision notes provide worked example of each depreciation method.</span></div>
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<strong><span style="font-family: Arial, Helvetica, sans-serif;">Depreciation Methods :</span></strong></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The total amount to be depreciated over the life of a fixed asset is determined by the following calculation:</span></div>
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<strong><span style="color: black; font-family: Arial, Helvetica, sans-serif;">Cost of the fixed asset less residual value</span></strong></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The period over which to depreciate a fixed asset is known as the<strong> "useful economic life"</strong> of the asset.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">So how much of this depreciable amount is charged against profits in each accounting period?</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">A depreciation method is required to allocate, in a systematic way, the total amount to be depreciated between each accounting period of the asset's useful economic life.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">There are various methods of depreciation available. However, most businesses appear to adopt one of the two methods described below.</span></div>
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<strong><span style="font-family: Arial, Helvetica, sans-serif;">Method 1 - Straight-line depreciation:</span></strong></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The straight-line method of depreciation is widely used and simple to calculate. It is based on the principle that each accounting period of the asset's life should bear an equal amount of depreciation.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">As a result, the depreciation charge for the asset can be calculated using the following formula:</span><br />
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<strong><span style="color: #0000cc; font-family: Arial, Helvetica, sans-serif;">Dpn = (C- R)/ N</span></strong><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>where:</strong></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Dpn = Annual straight-line depreciation charge</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">C = Cost of the asset</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">R = Residual value of the asset</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">N = Useful economic life of the asset (years)</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Whilst it is simple and popular, Is the straight line depreciation method the most appropriate way of calculating depreciation?</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The answer lies in understanding that depreciation is a process of allocation, not valuation.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The pattern of annual depreciation charges for a fixed asset should attempt to match the pattern of benefits derived from that asset. Therefore, where the benefits from an asset are likely to be reasonably constant over its life the straight-line method of depreciation would be appropriate as it results in a constant annual depreciation charge.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">In practice it may be difficult to assess the pattern of benefits relating to an asset. In such cases the straight-line method may often be chosen simply because it is easy to understand and calculate.</span></div>
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<strong><span style="font-family: Arial, Helvetica, sans-serif;">Method 2 - Reducing balance method:</span></strong></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The reducing balance method of depreciation provides a high annual depreciation charge in the early years of an asset's life but the annual depreciation charge reduces progressively as the asset ages.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">To achieve this pattern of depreciation, a <strong>fixed annual depreciation percentage </strong>is applied to the <strong>written-down value</strong> of the asset. Thus, depreciation is calculated as a percentage of the reducing balance.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">For certain fixed assets, the benefits derived may be high in the early years, but may decline as the asset ages. For such assets, the reducing-balance method of depreciation would be appropriate insofar as it matches the depreciation expense with the pattern of benefits.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Once a particular method of depreciation has been chosen for a fixed asset, the method should be applied consistently over its life. It is only permissible to switch from one method to another if the new method provides a fairer presentation of the financial results and financial position.</span></div>
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<strong><span style="font-family: Arial, Helvetica, sans-serif;">Total depreciation charged</span></strong></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">It should be noted that, whichever method of depreciation is selected, the total depreciation to be charged over the useful life of a fixed asset will be the same.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">It is simply the allocation of the total depreciation charge between accounting periods that is affected by the choice of method.</span></div>
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<strong><span lang="EN" style="font-family: Arial, Helvetica, sans-serif; mso-ansi-language: EN;">Need for Provision of Depreciation:</span></strong><span lang="EN" style="mso-ansi-language: EN;"></span><br />
<span lang="EN" style="font-family: Arial, Helvetica, sans-serif; mso-ansi-language: EN;">The need for provision for depreciation arises for the following reasons:</span><br />
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<span lang="EN" style="font-family: Arial, Helvetica, sans-serif; mso-ansi-language: EN;">(1) Ascertainment of true profit or loss-Depreciation is a loss. So unless it is considered like all other expenses and losses, true profit/loss cannot be ascertained. In other words, depreciation must be considered in order to find out true profit/loss of a business.</span></div>
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<span lang="EN" style="font-family: Arial, Helvetica, sans-serif; mso-ansi-language: EN;">(2) Ascertainment of true cost of production-Goods are produced with the help of plant and machinery which incurs depreciation in the process of production. This depreciation must be considered as a part of the cost of production of goods. Otherwise, the cost of production would be shown less than the true cost. <city w:st="on"><place w:st="on">Sale</place></city> price is normally fixed on the basis of cost of production. So, if the cost of production is shown less by ignoring depreciation, the sale price will also be fixed at a low level resulting in loss to the business;</span></div>
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<span lang="EN" style="font-family: Arial, Helvetica, sans-serif; mso-ansi-language: EN;">(3) True Valuation of Assets-Value of assets gradually decreases on account of depreciation. If depreciation is not taken into account, the value of asset will be shown in the books at a figure higher than its true value and hence the true financial position of the business will not be disclosed through Balance Sheet.</span></div>
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<span lang="EN" style="font-family: Arial, Helvetica, sans-serif; mso-ansi-language: EN;">(4) Replacement of Assets-After some time an asset will be completely exhausted on account of use. A new asset then be purchased requiring large sum of money. If the whole amount of profit is withdrawn from business each year without considering the loss on account of depreciation, necessary sum may not be available for. buying the new assets. In such a case the required money is to be collected by introducing fresh capital or by obtaining loan by selling some other assets. This is contrary &0sound commercial policy.</span></div>
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<span lang="EN" style="font-family: Arial, Helvetica, sans-serif; mso-ansi-language: EN;">(5) Keeping Capital' Intact-Capital invested in buying an asset, gradually diminishes on account of depreciation. If loss on account of depreciation is not considered in determining profit/ loss at the year end, profit will be shown more. If the excess profit is withdrawn, the working capital will gradually reduce, the business will become weak and its profit earning capacity will also fall.</span></div>
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<span lang="EN" style="mso-ansi-language: EN;"><span style="font-family: Arial, Helvetica, sans-serif;"><span style="mso-spacerun: yes;"> </span>(6) Legal Restriction-According to Sec. 205 of the Companies Act, 1956 dividend cannot be declared without charging depreciation on fixed assets. Thus in "Case of joint stock companies charging of depreciation is compulsory.</span></span></div>
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<span style="color: blue;"><span style="font-family: Arial, Helvetica, sans-serif;"><span style="font-size: x-small;"><span lang="EN" style="mso-ansi-language: EN;">Sources : ezinearticles.com ,</span><span lang="EN"> </span><span lang="EN" style="mso-ansi-language: EN;">tutor2u.net,accountingcoach.com</span></span></span></span></div>
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<span style="color: #e06666; font-family: Arial, Helvetica, sans-serif; font-size: small;">Why Depreciation Expense needs to be added back to Net Income in Cash Flow ?</span></h2>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">Depreciation Expense:</span></h2>
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<span style="font-family: Arial, Helvetica, sans-serif;"><b>Depreciation</b> moves the cost of an asset to <b>Depreciation Expense</b> during the asset's useful life. The accounts involved in recording depreciation are Depreciation Expense and <b>Accumulated Depreciation</b>. As you can see, cash is not involved. In other words, depreciation reduces net income on the income statement, but it does not reduce the Cash account on the balance sheet. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Because we begin preparing the statement of cash flows using the net income figure taken from the income statement, we need to adjust the net income figure so that it is not reduced by Depreciation Expense. To do this, we add back the amount of the Depreciation Expense.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Depletion Expense and <b>Amortization Expense</b> are accounts similar to Depreciation Expense, as all three involve allocating the cost of a long-term asset to an expense over the useful life of the asset. There is no cash involved.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">In the operating activities section of the cash flow statement, add back expenses that did not require the use of cash. Examples are depreciation, depletion, and amortization expense.</span></center>
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<span style="font-family: Arial, Helvetica, sans-serif;">Let's illustrate how a depreciation expense is handled by continuing with the Good Deal Co.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">June Transactions and Financial Statements:</span></h2>
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<span style="font-family: Arial, Helvetica, sans-serif;">The only transaction recorded by Good Deal during June was the depreciation on the office equipment. Recall that on May 31 Good Deal purchased the office equipment (a new computer and printer) for $1,100 and it was put into service on the same day. Let's assume that a depreciation expense of $20 per month is recorded by Good Deal. As a result, Good Deal's financial statements at June 30 will be as follows:</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Good Deal Co.<br /><b>Income Statement</b><br />For the Month Ended June 30, 2012</span></center>
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<tr><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Revenues</span></td><td align="right" width="80"><span style="font-family: Arial, Helvetica, sans-serif;">$ 0 </span></td></tr>
<tr><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Expenses</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td><b><span style="font-family: Arial, Helvetica, sans-serif;">Depreciation Expense</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> 20</u> </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td><span style="font-family: Arial, Helvetica, sans-serif;">Net Income</span></td><td align="right"><span class="doublebottom" style="font-family: Arial, Helvetica, sans-serif;">$(20)</span></td></tr>
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<span style="font-family: Arial, Helvetica, sans-serif;">Good Deal Co.<br /><b>Income Statement</b><br />For the <i>Six Months</i> Ended June 30, 2012</span></center>
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<tr><td colspan="3"><span style="font-family: Arial, Helvetica, sans-serif;">Revenues</span></td><td align="right" width="80"><u><span style="font-family: Arial, Helvetica, sans-serif;">$800</span></u></td></tr>
<tr><td colspan="3"><span style="font-family: Arial, Helvetica, sans-serif;">Expenses</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
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<tr><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="160"><span style="font-family: Arial, Helvetica, sans-serif;">Total Expense</span></td><td align="right"><u><span style="font-family: Arial, Helvetica, sans-serif;"> 520</span></u></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Net Income</span></td><td align="right"><span class="doublebottom" style="font-family: Arial, Helvetica, sans-serif;">$280</span></td></tr>
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<span style="font-family: Arial, Helvetica, sans-serif;">Good Deal Co.<br /><b>Balance Sheet</b><br />June 30, 2012</span></center>
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<tr><td colspan="2"><b><u><span style="font-family: Arial, Helvetica, sans-serif;">Assets</span></u></b></td><td width="65"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="20"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="3"><b><u><span style="font-family: Arial, Helvetica, sans-serif;">Liabilities & Owner's Equity</span></u></b></td><td width="65"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Cash</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">$ 850 </span></td><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="3"><span style="font-family: Arial, Helvetica, sans-serif;">Liabilities</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Accounts Receivable</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0 </span></td><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Accounts Payable</span></b></td><td align="right"><u><span style="font-family: Arial, Helvetica, sans-serif;">$ 0</span></u></td></tr>
<tr><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Inventory</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">200 </span></td><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="3"><span style="font-family: Arial, Helvetica, sans-serif;">Owner's Equity</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Supplies</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">150 </span></td><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;"><b>Matt Jones, Capital</b> (excl. net inc.)</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">2,000</span></td></tr>
<tr><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Office Equipment</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">1,100 </span></td><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Matt Jones, Curr Yr. Net Income</span></b></td><td align="right"><u><span style="font-family: Arial, Helvetica, sans-serif;"> 280</span></u></td></tr>
<tr><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Less: <b>Accum. Depreciation</b></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> (20</u>)</span></td><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="210"><span style="font-family: Arial, Helvetica, sans-serif;">Total Matt Jones, Capital</span></td><td align="right"><u><span style="font-family: Arial, Helvetica, sans-serif;"> 2,280</span></u></td></tr>
<tr><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="190"><span style="font-family: Arial, Helvetica, sans-serif;">Total Assets</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><span class="doublebottom">$2,280</span> </span></td><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Total Liabilities & Owner's Equity</span></td><td align="right"><span class="doublebottom" style="font-family: Arial, Helvetica, sans-serif;">$2,280</span></td></tr>
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<span style="font-family: Arial, Helvetica, sans-serif;">A balance sheet comparing June 30 to May 31 and the resulting differences or changes is shown below: </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Good Deal Co.<br /><b>Balance Sheets</b><br />June 30 and May 31, 2012</span></center>
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<tr><td colspan="3"><b><u><span style="font-family: Arial, Helvetica, sans-serif;">Assets</span></u></b></td><td align="right" width="80"><span style="font-family: Arial, Helvetica, sans-serif;"><span style="font-size: x-small;"><u><b>6-30-12</b></u></span> </span></td><td align="right" width="80"><span style="font-family: Arial, Helvetica, sans-serif; font-size: x-small;"><u><b>5-31-12</b></u></span></td><td align="right" width="80"><span style="font-family: Arial, Helvetica, sans-serif;"><span style="font-size: x-small;"><u><b>Change</b></u></span> </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Cash</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">$ 850 </span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">$ 850</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">$ 0 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Accounts Receivable</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0 </span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Inventory</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">200 </span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">200</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Supplies</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">150 </span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">150</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Office Equipment</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"> 1,100 </span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">1,100</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Less: <b>Accumulated Depreciation</b></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> (20</u>)</span></td><td align="right"><u><span style="font-family: Arial, Helvetica, sans-serif;"> 0</span></u></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> (20</u>)</span></td></tr>
<tr><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="270"><span style="font-family: Arial, Helvetica, sans-serif;">Total Assets</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><span class="doublebottom">$2,280</span> </span></td><td align="right"><span class="doublebottom" style="font-family: Arial, Helvetica, sans-serif;">$2,300</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><span class="doublebottom">$(20</span>)</span></td></tr>
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<tr><td colspan="3"><b><u><span style="font-family: Arial, Helvetica, sans-serif;">Liabilities & Owner's Equity</span></u></b></td><td align="right" width="80"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td align="right" width="80"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td align="right" width="80"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td colspan="3"><span style="font-family: Arial, Helvetica, sans-serif;">Liabilities</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Accounts Payable</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u>$ 0</u> </span></td><td align="right"><u><span style="font-family: Arial, Helvetica, sans-serif;">$ 0</span></u></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u>$ 0</u> </span></td></tr>
<tr><td colspan="3"><span style="font-family: Arial, Helvetica, sans-serif;">Owner's Equity</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;"><b>Matt Jones, Capital</b> (excl. net inc.)</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">2,000 </span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">2,000</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Matt Jones, Curr Yr. Net Income</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> 280</u> </span></td><td align="right"><u><span style="font-family: Arial, Helvetica, sans-serif;"> 300</span></u></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> (20</u>)</span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="270"><span style="font-family: Arial, Helvetica, sans-serif;">Total Matt Jones, Capital</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> 2,280</u> </span></td><td align="right"><u><span style="font-family: Arial, Helvetica, sans-serif;"> 2,300</span></u></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> (20</u>)</span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Total Liabilities & Owner's Equity</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><span class="doublebottom">$2,280</span> </span></td><td align="right"><span class="doublebottom" style="font-family: Arial, Helvetica, sans-serif;">$2,300</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><span class="doublebottom">$(20</span>)</span></td></tr>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">(If you are wondering why June 30 is shown before May 31, it is because accountants usually place the most current amounts closest to the account names. This is a courtesy to the reader in that these are assumed to be the more important amounts and will be easier to read if placed closest to the words.)</span></h6>
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<span style="font-family: Arial, Helvetica, sans-serif;">Good Deal Co.<br /><b>Statement of Cash Flows</b><br />For the Month Ended June 30, 2012</span></center>
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<tr><td colspan="3"><b><span style="font-family: Arial, Helvetica, sans-serif;">Operating Activities</span></b></td><td width="80"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Net Income</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">$ (20)</span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Add: <b>Depreciation Expense</b></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> 20</u> </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="320"><span style="font-family: Arial, Helvetica, sans-serif;">Cash Provided (Used) in Operating Activities</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><b>0</b> </span></td></tr>
<tr><td colspan="3"><b><span style="font-family: Arial, Helvetica, sans-serif;">Investing Activities</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><b>0</b> </span></td></tr>
<tr><td colspan="3"><b><span style="font-family: Arial, Helvetica, sans-serif;">Financing Activities</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> <b>0</b></u> </span></td></tr>
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<tr><td colspan="3"><span style="font-family: Arial, Helvetica, sans-serif;">Net Increase in Cash</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"> <b>0</b> </span></td></tr>
<tr><td colspan="3"><span style="font-family: Arial, Helvetica, sans-serif;">Cash at the beginning of the month</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> <b>850</b></u> </span></td></tr>
<tr><td colspan="3" valign="top"><span style="font-family: Arial, Helvetica, sans-serif;">Cash at the end of the month</span></td><td align="right" valign="top"><span style="font-family: Arial, Helvetica, sans-serif;"><span class="doublebottom"><b>$850</b></span> </span></td></tr>
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<span style="font-family: Arial, Helvetica, sans-serif;">The cash flow statement for the month of June illustrates why depreciation expense needs to be added back to net income. Good Deal did not spend any cash in June, however, the entry in the Depreciation Expense account resulted in a net loss on the income statement. To convert the bottom line of the income statement (a loss of $20) to the amount of cash provided or used in operating activities ($0) we need to add back or remove the depreciation expense amount.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Good Deal Co.<br /><b>Balance Sheets</b><br />June 30, 2012 and December 31, 2011</span></center>
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<tr><td colspan="3"><b><u><span style="font-family: Arial, Helvetica, sans-serif;">Assets</span></u></b></td><td align="right" width="80"><span style="font-family: Arial, Helvetica, sans-serif;"><span style="font-size: x-small;"><u><b>6-30-12</b></u></span> </span></td><td align="right" width="80"><span style="font-family: Arial, Helvetica, sans-serif; font-size: x-small;"><u><b>12-31-11</b></u></span></td><td align="right" width="80"><span style="font-family: Arial, Helvetica, sans-serif;"><span style="font-size: x-small;"><u><b>Change</b></u></span> </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Cash</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">$ 850 </span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">$ 0</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">$ 850 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Accounts Receivable</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0 </span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Inventory</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">200 </span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">200 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Supplies</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">150 </span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">150 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Office Equipment</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"> 1,100 </span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">1,100 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Less: <b>Accumulated Depreciation</b></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> (20</u>)</span></td><td align="right"><u><span style="font-family: Arial, Helvetica, sans-serif;"> 0</span></u></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> (20</u>)</span></td></tr>
<tr><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="270"><span style="font-family: Arial, Helvetica, sans-serif;">Total Assets</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><span class="doublebottom">$2,280</span> </span></td><td align="right"><span class="doublebottom" style="font-family: Arial, Helvetica, sans-serif;">$ 0</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><span class="doublebottom">$2,280</span> </span></td></tr>
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<tr><td colspan="3"><b><u><span style="font-family: Arial, Helvetica, sans-serif;">Liabilities & Owner's Equity</span></u></b></td><td align="right" width="80"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td align="right" width="80"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td align="right" width="80"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td colspan="3"><span style="font-family: Arial, Helvetica, sans-serif;">Liabilities</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Accounts Payable</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u>$ 0</u> </span></td><td align="right"><u><span style="font-family: Arial, Helvetica, sans-serif;">$ 0</span></u></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u>$ 0</u> </span></td></tr>
<tr><td colspan="3"><span style="font-family: Arial, Helvetica, sans-serif;">Owner's Equity</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;"><b>Matt Jones, Capital</b> (excl. net inc.)</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">2,000 </span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">0</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">2,000 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><b><span style="font-family: Arial, Helvetica, sans-serif;">Matt Jones, Curr Yr. Net Income</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> 280</u> </span></td><td align="right"><u><span style="font-family: Arial, Helvetica, sans-serif;"> 0</span></u></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> 280</u> </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="270"><span style="font-family: Arial, Helvetica, sans-serif;">Total Matt Jones, Capital</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> 2,280</u> </span></td><td align="right"><u><span style="font-family: Arial, Helvetica, sans-serif;"> 0</span></u></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> 2,280</u> </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Total Liabilities & Owner's Equity</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><span class="doublebottom">$2,280</span> </span></td><td align="right"><span class="doublebottom" style="font-family: Arial, Helvetica, sans-serif;">$ 0</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><span class="doublebottom">$2,280</span> </span></td></tr>
</tbody></table>
</td></tr>
</tbody></table>
</div>
<div class="Text">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="Text">
<table class="statement" style="width: 440px;"><tbody>
<tr><td class="padding"><table align="center" style="width: 420px;"><tbody>
<tr><td colspan="8"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<center>
<span style="font-family: Arial, Helvetica, sans-serif;">Good Deal Co.<br /><b>Statement of Cash Flows</b><br />For the <i>Six Months</i> Ended June 30, 2012</span></center>
</td></tr>
<tr><td colspan="3"><b><span style="font-family: Arial, Helvetica, sans-serif;">Operating Activities</span></b></td><td width="80"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Net Income</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">$ 280 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Add back: <b>Depreciation Expense</b></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">20 </span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Increase in <b>Inventory</b></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;">(200)</span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Increase in <b>Supplies</b></span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> (150</u>)</span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="10"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td width="320"><span style="font-family: Arial, Helvetica, sans-serif;">Cash Provided (Used) in Operating Activities</span></td><td align="right"><b><span style="font-family: Arial, Helvetica, sans-serif;">(50)</span></b></td></tr>
<tr><td colspan="3"><b><span style="font-family: Arial, Helvetica, sans-serif;">Investing Activities</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Increase in <b>Office Equipment</b></span></td><td align="right"><b><span style="font-family: Arial, Helvetica, sans-serif;">(1,100)</span></b></td></tr>
<tr><td colspan="3"><b><span style="font-family: Arial, Helvetica, sans-serif;">Financing Activities</span></b></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"></span></td></tr>
<tr><td><span style="font-family: Arial, Helvetica, sans-serif;"></span></td><td colspan="2"><span style="font-family: Arial, Helvetica, sans-serif;">Investment by Owner</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> <b>2,000</b></u> </span></td></tr>
<tr><td colspan="4"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></td></tr>
<tr><td colspan="3"><span style="font-family: Arial, Helvetica, sans-serif;">Net Increase in Cash</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"> <b>850</b> </span></td></tr>
<tr><td colspan="3"><span style="font-family: Arial, Helvetica, sans-serif;">Cash at the beginning of the year</span></td><td align="right"><span style="font-family: Arial, Helvetica, sans-serif;"><u> <b>0</b></u> </span></td></tr>
<tr><td colspan="3" valign="top"><span style="font-family: Arial, Helvetica, sans-serif;">Cash at June 30, 2012</span></td><td align="right" valign="top"><span style="font-family: Arial, Helvetica, sans-serif;"><span class="doublebottom"><b>$ 850</b></span> </span></td></tr>
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<span style="font-family: Arial, Helvetica, sans-serif;">Let's review the cash flow statement for the six months ended June 30:</span></div>
<div align="justify" class="Text">
<ul type="square">
<li class="lispace"><span style="font-family: Arial, Helvetica, sans-serif;">The operating activities section starts with the net income of $280 for the six-month period. Depreciation expense is added back to net income because it was a noncash transaction (net income was reduced, but there was no cash spent on depreciation). The increase in the Inventory account is not good for cash, as shown by the negative $200. Similarly, the increase in Supplies is not good for cash and it is reported as a negative $150. Combining the amounts, the net change in cash that is <i>explained by operating activities</i> is a negative $50. </span></li>
<li class="lispace"><span style="font-family: Arial, Helvetica, sans-serif;">The increase in long-term assets caused a cash outflow of $1,100 which is reported in the investing activities section. </span></li>
<li class="lispace"><span style="font-family: Arial, Helvetica, sans-serif;">There were no changes in long-term liabilities. There was a change in owner's equity since December 31, and as a result the financing activities section reports the owner's $2,000 investment into the Good Deal Co. </span></li>
<li class="lispace"><span style="font-family: Arial, Helvetica, sans-serif;">Combining the operating, investing, and financing activities, the statement of cash flows reports an increase in cash of $850. This agrees with the change in the Cash account as shown on the balance sheets from December 31, 2011 and June 30, 2012. </span></li>
</ul>
</div>
<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: blue;"><span style="font-family: Arial, Helvetica, sans-serif;"><span style="font-size: x-small;"><span lang="EN" style="mso-ansi-language: EN;">Sources : ezinearticles.com ,</span><span lang="EN"> </span><span lang="EN" style="mso-ansi-language: EN;">tutor2u.net,accountingcoach.com</span></span></span></span></span></div>
Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-64765027789523489542012-07-15T04:09:00.000-07:002012-09-20T10:24:00.034-07:00Balance Sheet Analysis<div dir="ltr" style="text-align: left;" trbidi="on">
<h3 style="text-align: left;">
<span style="line-height: 16px; text-align: justify;"><b><span style="font-family: Arial, Helvetica, sans-serif;">Balance Sheet:</span></b></span></h3>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><span style="line-height: 16px; text-align: justify;">A Balance sheet, is known as a "statement of financial position", reveals a company's assets, liabilities and owners' equity (net worth).</span> </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">This means that assets, or the means used to operate the company, are balanced by a company's financial obligations along with the equity investment brought into the company and its retained earnings.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Assets are what a company uses to operate its business, while its liabilities and equity are two sources that support these assets. Owners' equity, referred to as shareholders' equity in a publicly traded company, is the amount of money initially invested into the company plus any retained earnings, and it represents a source of funding for the business.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">It is important to note, that a balance sheet is a snapshot of the company's financial position at a single point in time.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><b>Balance Sheet Accounts:</b><br />The Chart of Accounts is normally arranged or grouped by the Major Types of Accounts. The Balance Sheet Accounts (Assets, Liabilities, & Equity) are presented first, followed by the Income Statement Accounts (Revenues & Expenses).<br /></span></div>
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<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Here we're going to discuss the Balance Sheet Portion of the Chart Of Accounts and how it's organized.</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">While most balance sheet accounts that need to be set up are common to all businesses, some depend on the type of business. Inventory accounts are needed for those businesses that produce and sell goods or "inventoriable" services as well as those that just buy and resell the goods.</span></div>
<span style="font-family: Arial, Helvetica, sans-serif;"><div style="text-align: justify;">
<br />The Assets, Liabilities, and Equity are presented in separate sections of a Balance Sheet in order that important relationships and subtotals and totals can be presented.<br /><br /><b>Note:</b> This USA Order may vary depending on your country.</div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><b>General Components of a Balance Sheet:</b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; line-height: normal;"><b>Assets</b> :<br /><b>Formal Definition:</b>The properties used in the operation or investment activities of a business.</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif; line-height: normal;"><strong>Informal Definition:</strong>All the good stuff a business has (anything with value). The goodies.</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif; line-height: normal;"><b>Additional Explanation:</b> The good stuff includes tangible and intangible stuff. Tangible stuff you can physical see and touch such as vehicles, equipment and buildings. Intangible stuff is like pieces of paper (sales invoices) representing loans to your customers where they promise to pay you later for your services or product.</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif; line-height: normal;">Assets are generally assigned to sub-categories or sub-groups. Similar types of assets are grouped together. The groups are based on the asset's purpose or use and liquidity (availability of the asset for paying debts).</span></div>
<span style="font-family: Arial, Helvetica, sans-serif; line-height: normal;"><br /></span><span style="font-family: Arial, Helvetica, sans-serif; line-height: normal;">The order that the Assets are presented are based on the following guidelines:</span><br />
<ol>
<li><span style="font-family: Arial, Helvetica, sans-serif; line-height: normal;">List the Items that are cash.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; line-height: normal;">List the Items that are held primarily for converting into cash and list them in the order of their expected conversion into cash (beginning with the fastest and moving toward the slowest).</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; line-height: normal;">List the Items used in operations that could be converted into cash listed in the order of their expected conversion into cash (beginning with the fastest and moving toward the slowest).</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; line-height: normal;">List the Items whose cost provide future benefits or can not be converted into cash.</span></li>
</ol>
<br />
<ul>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif; line-height: normal;"><b>Current Assets:</b><br />Current Assets include Cash and Assets that will be converted into cash or consumed in a relatively short period of time, usually within a year or the business's operating cycle. Prepaid Expenses and Supplies (already paid for or a liability incurred) are included because they will normally be used or consumed within the operating cycle.</span></div>
<ul>
<li><div style="text-align: justify;">
<b>Cash and Cash Equivalents </b><br />Anything accepted by a bank for deposit is considered as Cash or Cash Equivalents. Cash in the form of coins and currency, undeposited checks, money orders, deposits in banks are examples. The cash must be available for immediate use and not restricted in any manner. </div>
<ul>
<li>Cash On Hand
<ul>
<li>Cash Register Drawer(s) Funds</li>
<li>Undeposited Cash</li>
</ul>
</li>
<li>Petty Cash</li>
<li>Bank Checking Accounts
<ul>
<li>General</li>
<li>Payroll</li>
</ul>
</li>
<li>Savings Accounts</li>
<li>Money Market Accounts</li>
</ul>
</li>
<li><b>Short-Term Investments </b><br /><div style="text-align: justify;">
<span style="background-color: white;">Short-Term Investments include readily marketable securities that can easily be sold and converted back into cash. These type of investments normally result from a business in the lucky position of having excess cash available. The invested should be temporary in nature and not made to exercise control over another business or satisfy any other requirements and/or agreements. Reported at current market value by using an allowance for unrealized market gains and losses.</span></div>
<br /><ul>
<li>Certificates of Deposit</li>
<li>Stocks</li>
<li>Bonds</li>
<li>Other Short Term Investments</li>
<li>Valuation Allowance for Market Value Fluctuations</li>
</ul>
</li>
<li><b>Receivables </b><br /><div style="text-align: justify;">
<span style="background-color: white;">Included in this category are Accounts Receivable (open account customer balances resulting from sales) and customer Notes (principal and interest resulting from sales) that are formalized agreements and evidenced in writing. Short term temporary loans and advances are also included. An allowance for estimated uncollectible amounts is also provided.</span></div>
<br /><ul>
<li>Accounts Receivable<br />This account will normally have a sub ledger that contains a record for each customer or client.</li>
<li>Allowance For Bad Debts (Contra Account)<br />Used to record customer accounts that may not be collected.</li>
<li>Trade Notes Receivable - Current principal portion</li>
<li>Interest Receivable</li>
<li>Other Receivables
<ul>
<li>Short Term Owner Loans and Advances</li>
<li>Short Term Employee Loans & Advances</li>
<li>Short Term Travel and Expense Advances</li>
</ul>
</li>
</ul>
</li>
<li><b>Inventory </b><br /><div style="text-align: justify;">
<span style="background-color: white;">The accounts set up in the inventory section depend on the type of business. Is the business a service, retailer, wholesaler or manufacturer ? For retailers and wholesalers an inventory sub ledger is usually maintained to keep track of each individual product. Manufacturing types of businesses usually and Service types of businesses occasionally maintain sub legers for projects, jobs, and processes.</span></div>
<br /><ul>
<li>Manufacturer
<ul>
<li>Raw Materials</li>
<li>Manufacturing Supplies</li>
<li>Work In Process
<ul>
<li>Direct Labor</li>
<li>Direct Material</li>
<li>Manufacturing Costs
<ul>
<li>Direct Labor</li>
<li>Direct Material</li>
<li>Manufacturing Overhead - Actual
<ul>
<li>Indirect Labor</li>
<li>Supervision Salaries</li>
<li>Fringe Benefits</li>
<li>Manufacturing Supplies</li>
<li>Small Parts</li>
<li>Perishable Tools</li>
<li>Utilities</li>
<li>Depreciation</li>
<li>Rent</li>
<li>Leases</li>
<li>Repairs & Maintenance</li>
<li>Insurance</li>
<li>Property Taxes</li>
</ul>
</li>
<li>Overhead Costs Applied</li>
</ul>
</li>
<li>Finished Goods</li>
</ul>
</li>
<li>Retailer or Wholesaler
<ul>
<li>Merchandise Inventory</li>
<li>Store Supplies</li>
</ul>
</li>
<li>Service
<ul>
<li>Work In Process - Projects / Jobs</li>
<li>Completed / Unbilled Projects / Jobs</li>
</ul>
</li>
<li>Common To All
<ul>
<li>Office Supplies</li>
</ul>
</li>
</ul>
</li>
<li><b>Prepaid Expenses</b><br /><div style="text-align: justify;">
<span style="background-color: white;">Prepaid Expenses are assets created by the early payment of cash or assuming a liability. They expire and are charged to expenses based on the passage of time, usage, or other factors. All Prepaid Expenses could be recorded in a single account or separate accounts could be used for each different type.</span></div>
<br /><ul>
<li>Prepaid Insurance</li>
<li>Prepaid Rent</li>
<li>Prepaid Advertising</li>
<li>Prepaid Interest</li>
<li>Other Prepaid Expenses</li>
</ul>
</li>
<li>Other Current Assets<br />This category includes other current assets that do not neatly fit into any of the other categories. The amounts must be deemed collectible in a relatively short period of time (operating cycle).<br /><ul>
<li>Notes Receivable - Current principal portion of Long-term Notes</li>
<li>Other Current Assets</li>
</ul>
</li>
</ul>
</li>
<li><b>Long-Term Investments</b><br />Investments that are intended to be held and not converted into cash for an extended period of time (longer than the operating cycle). Reported at current market value by using an allowance for unrealized market gains and losses.<br /><ul>
<li>Stocks</li>
<li>Bonds</li>
<li>Other Long Term Investments</li>
<li>Valuation Allowance for Market Value Fluctuations</li>
</ul>
</li>
<li><b>Property, Plant, and Equipment</b><br />Assets of a durable nature that are used to provide current and future economic benefits to the business.These accounts will normally have a sub ledger that contains a record for each parcel of land, building, or piece of machinery and equipment along with depreciation calculations and amounts.<br /><br /><ul>
<li>Land</li>
<li>Buildings</li>
<li>Accumulated Depreciation - Buildings (Contra Account)</li>
<li>Building Improvements</li>
<li>Accumulated Depreciation - Building Improvements (Contra Account)</li>
<li>Machinery and Equipment</li>
<li>Accumulated Depreciation - Machinery and Equipment (Contra Account)</li>
<li>Office Equipment</li>
<li>Accumulated Depreciation - Office Equipment (Contra Account)</li>
<li>Computer Equipment</li>
<li>Accumulated Depreciation - Computer Equipment (Contra Account)</li>
<li>Vehicles</li>
<li>Accumulated Depreciation - Vehicles (Contra Account)</li>
<li>Furniture and Fixtures</li>
<li>Accumulated Depreciation - Furniture and Fixtures (Contra Account)</li>
<li>Leasehold Improvements</li>
<li>Accumulated Amortization - Leasehold Improvements (Contra Account)</li>
<li>Computer Software</li>
<li>Accumulated Amortization - Computer Software (Contra Account)</li>
<li>Other Property, Plant, or Equipment</li>
<li>Accumulated Depreciation - Other Property, Plant, or Equipment</li>
</ul>
</li>
<li><b>Other Noncurrent Assets</b><br />All assets that are noncurrent and that do not fit neatly into any of the other categories.<br /><ul>
<li>Long Term Owner Loans & Advances</li>
<li>Long Term Employee Loans & Advances</li>
<li>Notes Receivable - Long-term principal portion of Long-term Notes</li>
<li>Security Deposits</li>
<li>Intangible Assets
<ul>
<li>Patents</li>
<li>Organization Costs</li>
<li>Goodwill</li>
<li>Accumulated Amortization (Contra Account)</li>
</ul>
</li>
</ul>
</li>
</ul>
</li>
</ul>
<ul style="text-align: left;">
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif; line-height: normal;"><b>Liabilities :</b><br /><b>Formal Definition:</b>Claims by creditors to the property (assets) of a business until they are paid.Informal Definition:Other's claims to the business's stuff. Amounts the business owes to others.<br /><b>Additional Explanation: </b>Usually one of a business's biggest liabilities (hopefully they are not past due) is to suppliers where they have bought goods and services and charged them.<br />Liabilities are listed in the order of their expected payment date (maturity). In other words, how soon they must be repaid. Liability accounts are separated into current (short-term) liabilities and long-term liabilities. Short-Term Liabilities generally are debts that must be repaid within 1 year from the date of the balance sheet. Long-Term Liabilities are debts that must be paid more than 1 year from the date of the balance sheet.<br /></span></div>
<ul>
<li><b>Current Liabilities</b><br />Current liabilities are the portion of obligations (amounts owed) due to be paid within the current operating cycle (normally a year) and that normally require the use of existing current assets to satisfy the debt.<br /><ul>
<li>Short Term Notes (Demand Notes)</li>
<li>Accounts Payable Trade<br />A sub ledger is normally maintained in order to keep up with and track amounts owed to individual suppliers.</li>
<li>Accounts Payable Other</li>
<li>Payroll Liabilities
<ul>
<li>Accrued Salaries and Wages Payable</li>
<li>Employee Payroll Withholdings (Deductions)
<ul>
<li>Employee U.S. Federal Income Tax Withheld</li>
<li>Employee State Income Tax Withheld</li>
<li>Employee Local Income Tax Withheld</li>
<li>Employee FICA Withheld</li>
<li>Employee Medicare Withheld</li>
<li>Employee Garnishments Withheld</li>
<li>Employee Benefits
<ul>
<li>Employee Insurance Deduction Withheld</li>
<li>401 K Deduction Withheld</li>
<li>IRA Deduction Withheld</li>
</ul>
</li>
<li>Other Payroll Withholdings</li>
</ul>
</li>
<li>Employer Provided Benefits
<ul>
<li>Mandatory
<ul>
<li>Employer FICA Contribution Payable</li>
<li>Employer Medicare Contribution Payable</li>
<li>Employer Federal Unemployment Payable</li>
<li>Employer State Unemployment Payable</li>
<li>Employer Workmen's Compensation Insurance Payable</li>
</ul>
</li>
<li>Optional
<ul>
<li>Employer Provided Health Insurance Payable</li>
<li>Employer Provided Life Insurance Payable</li>
<li>Employer Provided 401 K Contributions Payable</li>
<li>Employer Provided IRA Contributions Payable</li>
</ul>
</li>
</ul>
</li>
</ul>
</li>
<li>Sales Tax Payable</li>
<li>Unearned Revenues</li>
<li>Customer Advances and Deposits Payable</li>
<li>Interest Payable</li>
<li>Bank Loans (Notes Payable) - Current principal portion of Long-Term Notes</li>
<li>Notes Payable (other than bank notes) - Current principal portion of Long-Term Notes</li>
<li>Accrued and Estimated Liabilities
<ul>
<li>Accrued / Estimated Taxes Payable
<ul>
<li>Accrued Real Estate and Property Taxes Payable</li>
<li>Accrued Income and Franchise Taxes Payable
<ul>
<li>Accrued Federal Taxes Payable</li>
<li>Accrued State Taxes Payable</li>
<li>Accrued Local Taxes Payable</li>
</ul>
</li>
</ul>
</li>
<li>Other Accruals Payable</li>
</ul>
</li>
<li>Other Current Liabilities</li>
</ul>
</li>
<li><b>Long-Term Liabilities</b><br />Long term liability accounts are the portions of debts with due dates greater than a year or the operating cycle. These are obligations that are not expected to be paid within the current operating cycle.<br /><ul>
<li>Bank Loans (Notes Payable) - Long Term principal portion</li>
<li>Notes Payable (other than bank notes) - Long Term principal portion</li>
<li>Other Long-Term Liabilities</li>
</ul>
</li>
</ul>
</li>
</ul>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b style="line-height: normal;">Equity (Capital):</b><br /><strong>Formal Definition: </strong>The owner's rights or claims to the property (assets) of the business.</span></div>
<div style="line-height: normal; text-align: justify;">
<strong>Informal Definition: </strong>What the business owes the owner(s). The good stuff left for the owner(s) assuming all liabilities (amounts owed) have been paid.</div>
<div style="line-height: normal; text-align: justify;">
The accounts set up in this section will depend on the legal structure of your business. These accounts report the Owner's Capital Invested and the Accumulated Profits or Losses for the business since it began. Owner sub ledgers may also be maintained to keep up with and track shares and interests and amounts owed individual owners.</div>
<div style="line-height: normal;">
</div>
<ul style="line-height: normal;">
<li><b>Sole Proprietorship</b>
<ul>
<li>Owner's Capital</li>
<li>Owner's Drawing</li>
</ul>
</li>
<li><b>Partnership or Limited Liability Company</b>
<ul>
<li>Partner's or Member's Capital</li>
<li>Partner's or Member's Drawing</li>
</ul>
</li>
<li><b>Corporation</b></li>
<ul>
<li>Capital Stock
<ul>
<li>Common Stock
<ul>
<li>Common Stock Par or Stated Value</li>
<li>Premium Paid on Common Stock</li>
</ul>
</li>
<li>Preferred Stock
<ul>
<li>Preferred Stock Par or Stated Value</li>
<li>Premium Paid on Preferred Stock</li>
</ul>
</li>
</ul>
</li>
<li>Retained Earnings</li>
</ul>
</ul>
<div style="line-height: normal;">
<br /></div>
<div style="line-height: normal;">
<br /></div>
<div style="line-height: normal;">
<h4>
<b>Sample Balance Sheet:</b></h4>
<br />
<table align="center" bgcolor="#fdfced" cellpadding="4" cellspacing="0" style="border-bottom: rgb(204,204,204) 2px solid; border-image: initial; border-left: rgb(204,204,204) 2px solid; border-right: rgb(204,204,204) 2px solid; border-top: rgb(204,204,204) 2px solid; color: black; font-family: Arial, Verdana, sans-serif; font-size: 13px; height: 720px; text-align: left; width: 357px;"><tbody>
<tr><td><br />
<br />
<br />
<center>
<b>Example Company<br />Balance Sheet<br />December 31, 2011</b></center>
<br />
<table align="center" border="0" cellpadding="1" cellspacing="0" style="width: 590px;"><tbody>
<tr><td colspan="3" style="font-size: 13px;"><b>ASSETS</b></td><td align="right" style="font-size: 13px;" width="70"></td><td style="font-size: 13px;" width="10"></td><td colspan="4" style="font-size: 13px;"><b>LIABILITIES</b></td></tr>
<tr><td colspan="3" style="font-size: 13px;"><b>Current Assets</b></td><td align="right" style="font-size: 13px;" width="70"></td><td style="font-size: 13px;" width="10"></td><td colspan="3" style="font-size: 13px;"><b>Current Liabilities</b></td><td align="right" style="font-size: 13px;" width="70"></td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/C/cash.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Cash</a></b></td><td align="right" style="font-size: 13px;" width="70">$ 2,100 </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/N/notes-payable.html" style="color: #2c0075; text-decoration: none;">Notes Payable</a></b></td><td align="right" style="font-size: 13px;" width="70">$ 5,000 </td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/P/petty-cash.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Petty Cash</a></b></td><td align="right" style="font-size: 13px;" width="70">100 </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/A/accounts-payable.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Accounts Payable</a></b></td><td align="right" style="font-size: 13px;" width="70">35,900 </td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/T/temporary-investments.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Temporary Investments</a></b></td><td align="right" style="font-size: 13px;" width="70">10,000 </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/W/wages-payable.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Wages Payable</a></b></td><td align="right" style="font-size: 13px;" width="70">8,500 </td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/A/accounts-receivable-net.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Accounts Receivable - net</a></b></td><td align="right" style="font-size: 13px;" width="70">40,500 </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/I/interest-payable.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Interest Payable</a></b></td><td align="right" style="font-size: 13px;" width="70">2,900 </td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/I/inventory.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Inventory</a></b></td><td align="right" style="font-size: 13px;" width="70">31,000 </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/T/taxes-payable.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Taxes Payable</a></b></td><td align="right" style="font-size: 13px;" width="70">6,100 </td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/S/supplies.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Supplies</a></b></td><td align="right" style="font-size: 13px;" width="70">3,800 </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/W/warranty-liability.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Warranty Liability</a></b></td><td align="right" style="font-size: 13px;" width="70">1,100 </td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/P/prepaid-insurance.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Prepaid Insurance</a></b></td><td align="right" style="font-size: 13px;" width="70"><u> 1,500</u> </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/U/unearned-revenues.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Unearned Revenues</a></b></td><td align="right" style="font-size: 13px;" width="70"><u> 1,500</u> </td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td style="font-size: 13px;" width="5"></td><td style="font-size: 13px;" width="270">Total Current Assets</td><td align="right" style="font-size: 13px;" width="70"><u> 89,000</u> </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td style="font-size: 13px;" width="5"></td><td style="font-size: 13px;" width="280">Total Current Liabilities</td><td align="right" style="font-size: 13px;" width="70"><u> 61,000</u> </td></tr>
<tr><td align="right" colspan="9" style="font-size: 13px;"><span style="color: white;">-</span></td></tr>
<tr><td colspan="3" style="font-size: 13px;"><b>Investments</b></td><td align="right" style="font-size: 13px;" width="70"><u> 36,000</u> </td><td style="font-size: 13px;" width="10"></td><td colspan="3" style="font-size: 13px;"><b>Long-term Liabilities</b></td><td align="right" style="font-size: 13px;" width="70"></td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"></td><td align="right" style="font-size: 13px;" width="70"></td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/N/notes-payable.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Notes Payable</a></b></td><td align="right" style="font-size: 13px;" width="70">20,000 </td></tr>
<tr><td colspan="4" style="font-size: 13px;"><b>Property, Plant & Equipment</b></td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/B/bonds-payable.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Bonds Payable</a></b></td><td align="right" style="font-size: 13px;" width="70"><u> 400,000</u> </td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/L/land.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Land</a></b></td><td align="right" style="font-size: 13px;" width="70">5,500 </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td style="font-size: 13px;" width="5"></td><td style="font-size: 13px;">Total Long-term Liabilities</td><td align="right" style="font-size: 13px;" width="70"><u> 420,000</u> </td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/L/land-improvements.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Land Improvements</a></b> </td><td align="right" style="font-size: 13px;" width="70">6,500 </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td style="font-size: 13px;"></td><td style="font-size: 13px;"></td><td align="right" style="font-size: 13px;" width="70"></td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/B/buildings.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Buildings</a></b></td><td align="right" style="font-size: 13px;" width="70">180,000 </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td style="font-size: 13px;"></td><td style="font-size: 13px;"></td><td align="right" style="font-size: 13px;" width="70"></td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/E/equipment.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Equipment</a></b></td><td align="right" style="font-size: 13px;" width="70">201,000 </td><td style="font-size: 13px;" width="10"></td><td colspan="3" style="font-size: 13px;"><b>Total Liabilities</b></td><td align="right" style="font-size: 13px;" width="70"><u> 481,000</u> </td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;">Less: <b><a class="set4" href="http://www.accountingcoach.com/terms/A/accumulated-depreciation.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Accum Depreciation</a></b></td><td align="right" style="font-size: 13px;" width="70"><u> (56,000)</u></td><td style="font-size: 13px;" width="10"></td><td colspan="3" style="font-size: 13px;"></td><td align="right" style="font-size: 13px;" width="70"></td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td style="font-size: 13px;"></td><td style="font-size: 13px;">Prop, Plant & Equip - net</td><td align="right" style="font-size: 13px;" width="70"><u> 337,000</u> </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"></td><td align="right" style="font-size: 13px;" width="70"><u></u></td></tr>
<tr><td align="right" colspan="9" style="font-size: 13px;"><span style="color: white;">-</span></td></tr>
<tr><td colspan="3" style="font-size: 13px;"><b>Intangible Assets</b></td><td align="right" style="font-size: 13px;" width="70"></td><td style="font-size: 13px;" width="10"></td><td colspan="3" style="font-size: 13px;"><b>STOCKHOLDERS' EQUITY</b></td><td align="right" style="font-size: 13px;" width="70"></td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/G/goodwill.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Goodwill</a></b></td><td align="right" style="font-size: 13px;" width="70">105,000 </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/C/common-stock.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Common Stock</a></b></td><td align="right" style="font-size: 13px;" width="70">110,000 </td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/T/trade-names.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Trade Names</a></b></td><td align="right" style="font-size: 13px;" width="70"><u> 200,000</u> </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"><b><a class="set4" href="http://www.accountingcoach.com/terms/R/retained-earnings.html" rel="nofollow" style="color: mediumblue;">Retained Earnings</a></b></td><td align="right" style="font-size: 13px;" width="70">229,000 </td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td style="font-size: 13px;"></td><td style="font-size: 13px;">Total Intangible Assets</td><td align="right" style="font-size: 13px;" width="70"><u> 305,000</u> </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;">Less: <b><a class="set4" href="http://www.accountingcoach.com/terms/T/treasury-stock.html" rel="nofollow" style="color: #2c0075; text-decoration: none;">Treasury Stock</a></b></td><td align="right" style="font-size: 13px;" width="70"><u> (50,000)</u></td></tr>
<tr><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"></td><td align="right" style="font-size: 13px;" width="70"></td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td style="font-size: 13px;"></td><td style="font-size: 13px;">Total Stockholders' Equity</td><td align="right" style="font-size: 13px;" width="70"><u> 289,000</u> </td></tr>
<tr><td colspan="3" style="font-size: 13px;"><b>Other Assets</b></td><td align="right" style="font-size: 13px;" width="70"><u> 3,000</u> </td><td style="font-size: 13px;" width="10"></td><td style="font-size: 13px;" width="5"></td><td colspan="2" style="font-size: 13px;"></td><td align="right" style="font-size: 13px;" width="70"></td></tr>
<tr><td align="right" colspan="9" style="font-size: 13px;"><span style="color: white;">-</span></td></tr>
<tr><td colspan="3" style="font-size: 13px;"><b>Total Assets</b></td><td align="right" style="font-size: 13px;" width="70"><span class="doublebottom" style="border-bottom: 3px double; line-height: 1.8em;">$770,000</span> </td><td style="font-size: 13px;" width="10"></td><td colspan="3" style="font-size: 13px;"><b>Total Liab. & Stockholders' Equity</b></td><td align="right" style="font-size: 13px;" width="70"><span class="doublebottom" style="border-bottom: 3px double; line-height: 1.8em;">$770,000</span> </td></tr>
</tbody></table>
<br />
<br />
<br />
<div style="line-height: 17px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
The notes to the sample balance sheet have been omitted.</div>
</td></tr>
</tbody></table>
</div>
<div>
<h3>
<b><br /></b></h3>
<h3>
<b>Analysis of a Balance S</b><b style="background-color: white;">heet:</b></h3>
<div align="justify">
<span style="background-color: white; text-align: justify;">Since balance sheets present the health of a company as of one point in time, valuable information </span><span style="background-color: white; text-align: justify;">will be lost if managers do not take the opportunity to compare the progress and trend of a business </span><span style="background-color: white; text-align: justify;">by regularly evaluating and comparing balance sheets of past time periods. Information is power. The </span><span style="background-color: white; text-align: justify;">information that can be gleaned from the preparation and analysis of a balance sheet is one financial </span><span style="background-color: white; text-align: justify;">management tool that may mean the difference between success and failure.</span></div>
<br />
<div style="text-align: justify;">
<span style="background-color: white;">For </span><span style="background-color: white;">analyzing</span><span style="background-color: white;"> and better understanding of your </span><span style="background-color: white;">company's liquidity and leverage position </span><span style="background-color: white;">you can calculate liquidity and leverage ratios u</span><span style="background-color: white;">sing data from your balance sheet, </span></div>
<div style="text-align: justify;">
<span style="background-color: white;"><br /></span></div>
<div style="line-height: normal; text-align: justify;">
These financial ratios turn the raw financial data from the balance sheet into information that will <span style="background-color: white;">help you manage your business and make knowledgeable decisions.</span></div>
<div style="line-height: normal; text-align: justify;">
<span style="background-color: white;"><br /></span></div>
<div style="line-height: normal; text-align: justify;">
<span style="background-color: white;">A ratio shows the relationship </span><span style="background-color: white;">between two numbers. It is defined as the relative size of two quantities expressed as the quotient of </span><span style="background-color: white;">one divided by the other. Financial ratio analysis is important because it is one method loan officers use </span><span style="background-color: white;">to evaluate the credit worthiness of potential borrowers. Ratio analysis is a tool to uncover trends in a </span><span style="background-color: white;">business as well as allow the comparison between one business and another. </span></div>
<div style="line-height: normal;">
<span style="background-color: white;"><br /></span></div>
<div style="line-height: normal;">
<b>In the following section, four financial ratios that can be computed from a balance sheet are examined: </b></div>
<div style="line-height: normal;">
• Current Ratio </div>
<div style="line-height: normal;">
• Quick Ratio </div>
<div style="line-height: normal;">
• Working Capital </div>
<div style="line-height: normal;">
• Debt/Worth Ratio</div>
<div style="line-height: normal;">
<br /></div>
<div style="line-height: normal;">
<b>Current Ratio :</b></div>
<div style="line-height: normal;">
The current ratio (or liquidity ratio) is a measure of financial strength. The number of times </div>
<div style="line-height: normal;">
current assets exceed current liabilities is a valuable expression of a business’ solvency. </div>
<div style="line-height: normal;">
<br /></div>
<div style="line-height: normal;">
Here <span style="background-color: white;">is the formula to compute the current ratio: </span></div>
<div style="line-height: normal;">
<br /></div>
<div style="line-height: normal;">
<b>Current Ratio = Total Current Assets/<span style="background-color: white;">Total Current Liabilities</span></b></div>
<div style="line-height: normal;">
<span style="background-color: white;"><br /></span></div>
<div style="line-height: normal; text-align: justify;">
The current ratio answers the question, “Does my business have enough current assets to meet the <span style="background-color: white;">payment schedule of current liabilities with a margin of safety?” A rule-of-thumb puts a strong current </span><span style="background-color: white;">ratio at <b>2</b>. </span></div>
<div style="line-height: normal; text-align: justify;">
<span style="background-color: white;"><br /></span></div>
<div style="line-height: normal; text-align: justify;">
<span style="background-color: white;">Of course, the adequacy of a current ratio will depend on the nature of the small business </span></div>
<div style="line-height: normal; text-align: justify;">
and the character of the current assets and current liabilities. While there is usually little doubt about <span style="background-color: white;">debts that are due, there can be considerable doubt about the quality of accounts receivable or the cash </span><span style="background-color: white;">value of inventory. </span></div>
<div style="line-height: normal;">
<span style="background-color: white;"><br /></span></div>
<div style="line-height: normal;">
A current ratio can be improved by either increasing current assets or decreasing current liabilities. </div>
<div style="line-height: normal;">
This can take the form of the following: </div>
<div style="line-height: normal;">
• Paying down debt. </div>
<div style="line-height: normal;">
• Acquiring a loan (payable in more than one year’s time). </div>
<div style="line-height: normal;">
• Selling a fixed asset. </div>
<div style="line-height: normal;">
• Putting profits back into the business. </div>
</div>
<div style="line-height: normal;">
<br /></div>
<div>
<div>
A high current ratio may mean that cash is not being utilized in an optimal way. That is, the cash <span style="background-color: white;">might better be invested in equipment. </span></div>
<div>
<b><br /></b></div>
<div>
<b>Quick Ratio: </b></div>
<div>
The quick ratio is also called the “acid test” ratio. It is a measure of a company’s liquidity. The <span style="background-color: white;">quick ratio looks only at a company’s most liquid assets and divides them by current liabilities. </span></div>
<div>
<span style="background-color: white;"><br /></span></div>
<div>
Here is the formula for the quick ratio: </div>
<div>
<br /></div>
<div>
<b>Quick Ratio = (Current Assets - inventory)/<span style="background-color: white;"> Current Liabilities </span></b></div>
<div>
<span style="background-color: white;"><br /></span></div>
<div style="text-align: justify;">
The assets considered to be “quick” assets are cash, stocks and bonds, and accounts receivable (all <span style="background-color: white;">of the current assets on the balance sheet, except inventory). The quick ratio is an <b>acid test </b>of whether or </span><span style="background-color: white;">not a business can meet its obligations if adverse conditions occur. Generally, quick ratios between <b>0.5 </b></span><span style="background-color: white;"><b>and 1</b> are considered satisfactory as long as the collection of receivables is not expected to slow. </span></div>
<div style="text-align: justify;">
<span style="background-color: white;"><br /></span></div>
<div style="text-align: justify;">
Working Capital <span style="background-color: white;">Working capital should always be a positive number. It is used by lenders to evaluate a company’s </span><span style="background-color: white;">ability to weather hard times. Often, loan agreements specify a level of working capital that the </span><span style="background-color: white;">borrower must maintain. </span></div>
<span style="background-color: white;"><br /></span>
<div>
<b>Working Capital = Total Current Assets - Total Current Liabilities </b></div>
<div>
<br /></div>
<div>
The current ratio, quick ratio and working capital are all measures of a company’s liquidity. In general, <span style="background-color: white;">the higher these ratios are, the better for the business and the higher degree of liquidity. </span></div>
<div>
<span style="background-color: white;"><br /></span></div>
<div>
<b>Debt/Worth Ratio /L<span style="background-color: white;">everage Ratio:</span></b></div>
<div>
The debt/worth ratio (or leverage ratio) is an indicator of a business’ solvency. It is a measure of </div>
<div>
how dependent a company is on debt financing (or borrowings) as compared to owner’s equity. It </div>
<div>
shows how much of a business is owned and how much is owed. </div>
<div>
<br /></div>
<div>
The debt/worth ratio is computed as follows: </div>
<div>
<br /></div>
<div>
<b>Debt/Worth Ratio = Total Liabilities/<span style="background-color: white;"> Net Worth </span></b></div>
</div>
</li>
<span style="color: blue; font-family: Arial, Helvetica, sans-serif;">Sources: dwmbeancounter.com , zionsbank.com .</span>Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-68146555796946996222012-07-14T22:52:00.002-07:002012-11-21T22:56:43.489-08:00Cash Flow Statement Analysis<div dir="ltr" style="text-align: left;" trbidi="on">
<b><span style="font-family: Trebuchet MS, sans-serif;">Cash Flow Statement:</span></b><br />
<span style="font-family: Trebuchet MS, sans-serif;">Cash flow signifies the movements of cash in and out of a business concern. A company generates cash and spends cash and as such cash flow analysis is very useful for a company. It is mainly needed for short-run planning. </span><br />
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-family: Trebuchet MS, sans-serif;">A cash flow helps to make projections of cash inflows and outflows for the near future to determine the availability of cash during a particular time period. A cash flow statement summarizes the changes in cash position between dates of two balance sheets. To understand how a company obtains cash and how it spends cash during a given period, one needs to look at the changes in each of the items of the balance sheet over that period. It indicates the sources and uses of cash. Moreover, this statement analyses changes in non-current assets as well as current assets (other than cash) to determine the flow of cash.</span></div>
<span style="font-family: Trebuchet MS, sans-serif;"><br />A fund flow statement on cash basis is prepared by the following steps:<br />1.Classifying net balance sheet changes that seen between two points in time into changes that increase and decrease cash.<br />2.Classifying from the profit and loss (income statement) the factors that increase and decrease cash.<br />3.Consolidating this information into a source and use of funds format</span><br />
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="font-family: Trebuchet MS, sans-serif;">The following are the sources of cash-<br />a. the profitable operations of the firm,<br />b. decrease in assets (expect cash),<br />c. increase in liabilities (including debentures or bonds), and<br />d. Sale proceeds from an ordinary or preference share issue.<br /><br />The following are the uses of cash-<br />a. the loss from operations,<br />b. increase in assets (except cash),<br />c. decrease in liabilities (including redemption of debentures or bonds),<br />d. redemption of redeemable preference shares, and<br />e. cash dividends<br />The easiest and direct method of preparing a statement of changes in cash position is to only record inflows and outflows of cash, and find out the net change during a given period. If the net change in the cash position has to be found out from the income or profit and loss statement and comparative balance sheets, adjustments for the non-cash items are also to be made. Like cash from operations can be found out by adding depreciation to net profit as depreciation is a non-cash expense. Gain on sale of a non-current asset should be deducted while loss should be added to net profit.</span><br />
<span class="Apple-style-span" style="color: #3d3c3c; font-family: Trebuchet MS, sans-serif; font-size: 11px;"><br /></span>
<span class="Apple-style-span" style="color: #3d3c3c; font-family: Trebuchet MS, sans-serif; font-size: 11px;"><br /></span>
<span style="font-family: Trebuchet MS, sans-serif;"><span class="Apple-style-span" style="color: #3d3c3c; font-size: 11px;"><span class="Apple-style-span" style="color: black; font-size: 12px;"></span></span><br /></span>
<div class="stylepurple" style="background-image: url(http://www.principlesofaccounting.com/imagescss/purplegradient.jpg); border-width: 0px; color: white; font-size: 16px; font-weight: bold; padding: 8px; text-transform: capitalize;">
<span style="font-family: Trebuchet MS, sans-serif;">Cash Flow And The Statement Of Cash Flows</span></div>
<span style="font-family: Trebuchet MS, sans-serif;"><a href="http://www.principlesofaccounting.com/youtube_player/player.html?filename=FzgyLtaJ4cU" target="_blank"><img align="right" alt="" border="0" height="40" hspace="10" src="http://www.principlesofaccounting.com/images/videopurple.png" width="145" /></a>Accounting is based upon accrual concepts that report revenues as earned and expenses as incurred, rather than when received and paid. Accrual information is perhaps the best indicator of business success or failure.</span><br />
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="font-family: Trebuchet MS, sans-serif;">However, one cannot ignore the importance of cash flows. For example, a rapidly growing successful business can be profitable and still experience cash flow difficulties in trying to keep up with the need for expanded facilities and inventory. On the other hand, a business may appear profitable, but may be experiencing delays in collecting receivables, and this can impose liquidity constraints. Or, a business may be paying dividends, but only because cash is produced from the disposal of core assets. Sophisticated analysis will often reveal such issues.</span><br />
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="font-family: Trebuchet MS, sans-serif;">Rather than depending upon financial statement users to do their own detailed cash flow analysis, the accounting profession has seen fit to require another financial statement that clearly highlights the cash flows of a business entity. This required financial statement is appropriately named the<em style="color: #990000; font-size: 12px; font-style: normal; font-weight: bold;"><a href="http://www.blogger.com/blogger.g?blogID=8102870735351064242" id="cashflows" name="cashflows"></a>Statement of Cash Flows</em>. One objective of financial reporting is to provide <i>information that is helpful in assessing the amounts, timing, and uncertainty of an organization’s cash inflows and outflows.</i> As a result, the statement of cash flows provides three broad categories that reveal information about operating activities, investing activities, and financing activities. In addition, businesses are required to reveal significant noncash investing/financing transactions.</span><br />
<div class="head-2" style="color: black; font-size: 14px; font-style: italic; font-weight: bold; padding-bottom: 10px; padding-top: 10px; text-transform: uppercase;">
<span style="font-family: Trebuchet MS, sans-serif;">cASh Flow from OPERATING, INVESTING, AND FINANCING ACTIVITIES:</span></div>
<span style="font-family: Trebuchet MS, sans-serif;"><em style="background-color: white; color: #990000; font-style: normal; font-weight: bold; text-align: justify;">OperatingActivities: </em><span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black;">Cash inflows from <a href="http://www.blogger.com/blogger.g?blogID=8102870735351064242" id="operating" name="operating"></a><em style="color: #990000; font-style: normal; font-weight: bold;">operating activities</em> consist of receipts from customers for providing goods and services, and cash received from interest and dividend income (as well as the proceeds from the sale of “trading securities”). Cash outflows consist of payments for inventory, trading securities, employee salaries and wages, taxes, interest, and other normal business expenses. To generalize, cash from operating activities is generally linked to those transactions and events that enter into the determination of income. However, another way to view “operating” cash flows is to include anything that is not an “investing” or “financing” cash flow.</span></span></span><br />
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<span class="Apple-style-span" style="font-family: Trebuchet MS, sans-serif;"><em style="color: #990000; font-style: normal; font-weight: bold;">Investing Activities:</em></span><br />
<div>
<span style="font-family: Trebuchet MS, sans-serif;"><span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black;">Cash inflows from <a href="http://www.blogger.com/blogger.g?blogID=8102870735351064242" id="investing" name="investing"></a><em style="color: #990000; font-style: normal; font-weight: bold;">investing activities</em></span></span><span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black;"> result from items such as the sale of longer-term stock and bond investments, disposal of long-term productive assets, and receipt of principal repayments on loans made to others. Cash outflows from investing activities include payments made to acquire plant assets or long-term investments in other firms, loans to others, and similar items.</span></span><span class="Apple-style-span" style="font-size: 12px;"><em style="color: #990000; font-size: 12px; font-style: normal; font-weight: bold;"><br /></em></span></span><br />
<span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black; font-family: Trebuchet MS, sans-serif;"><br /></span></span>
<span style="font-family: Trebuchet MS, sans-serif;"><span class="Apple-style-span" style="font-size: 12px;"><em style="color: #990000; font-size: 12px; font-style: normal; font-weight: bold;"><span style="font-size: small;">FinancingActivities:</span> </em></span>Cash inflows from <a href="http://www.blogger.com/blogger.g?blogID=8102870735351064242" id="financing" name="financing"></a><em style="color: #990000; font-size: 12px; font-style: normal; font-weight: bold;">financing activities</em> include proceeds from a company’s issuance of its own stock or bonds, borrowings under loans, and so forth. Cash outflows for financing activities include repayments of amounts borrowed, acquisitions of treasury stock, and dividend distributions.</span><br />
<div style="text-align: justify;">
<span style="font-family: Trebuchet MS, sans-serif;">There are potential distinctions between US GAAP and international accounting standards. IFRS permits interest received (paid) to be disclosed in the investing (financing) section of a cash flow statement. The global viewpoint also provides more flexibility in the classification of dividends received (and paid). Additionally, international standards encourage disclosures of cash flows that are necessary to maintain operating capacity, versus cash flows attributable to increasing capacity.</span></div>
<div style="text-align: justify;">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="head-2" style="color: black; font-size: 14px; font-style: italic; font-weight: bold; padding-bottom: 10px; padding-top: 10px; text-transform: uppercase;">
<div style="text-align: justify;">
<span style="font-family: Trebuchet MS, sans-serif;">NONCASH INVESTING AND FINANCING ACTIVITIES</span></div>
</div>
<div style="text-align: justify;">
<span style="font-family: Trebuchet MS, sans-serif;">Some investing and financing activities occur without generating or consuming cash. For example, a company may exchange common stock for land or acquire a building in exchange for a note payable. While these transactions do not entail a direct inflow or outflow of cash, they do pertain to significant investing and/or financing events. Under US GAAP, the statement of cash flows includes a separate section reporting these noncash items. Thus, the statement of cash flows is actually enhanced to reveal the totality of investing and financing activities, whether or not cash is actually involved. The international approach is to present such information in the notes to the financial statements.</span></div>
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<div class="stylegreen" style="background-image: url(http://www.principlesofaccounting.com/imagescss/greengradient.jpg); border-width: 0px; color: white; font-size: 16px; font-weight: bold; padding: 8px; text-transform: capitalize;">
<span style="font-family: Trebuchet MS, sans-serif;"><a href="http://www.blogger.com/blogger.g?blogID=8102870735351064242" id="Direct" name="Direct"></a>Direct Approach To The Statement Of Cash Flows</span></div>
<span style="font-family: Trebuchet MS, sans-serif;"><a href="http://www.principlesofaccounting.com/youtube_player/player.html?filename=SeSB5uBrCaE" target="_blank"><img align="right" alt="" border="0" height="40" hspace="10" src="http://www.principlesofaccounting.com/images/videogreen.png" width="145" /></a>Spend just a few moments reviewing the preceding balance sheet, statement of retained earnings, and income statement for Emerson Corporation. Then, examine the following statement of cash flows. Everything within this cash flow statement is derived from the data and additional comments presented for Emerson. The tan bar on the left is not part of the statement; it is to facilitate the “line by line” explanation that follows.</span><br />
<div align="center">
<span style="font-family: Trebuchet MS, sans-serif;"><img alt="Emerson Corporation Direct Approach Statement" height="641" src="http://www.principlesofaccounting.com/chapter16/emersondirect.png" width="600" /></span></div>
<div class="head-2" style="color: black; font-size: 14px; font-style: italic; font-weight: bold; padding-bottom: 10px; padding-top: 10px; text-transform: uppercase;">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="head-2" style="color: black; font-size: 14px; font-style: italic; font-weight: bold; padding-bottom: 10px; padding-top: 10px; text-transform: uppercase;">
<span style="font-family: Trebuchet MS, sans-serif;">OPERATING ACTIVITIES<a href="http://www.blogger.com/blogger.g?blogID=8102870735351064242" id="opact" name="opact"></a></span></div>
<span style="font-family: Trebuchet MS, sans-serif;">Notice that Line 01 appears as follows:</span><br />
<div align="center">
<span style="font-family: Trebuchet MS, sans-serif;"><img alt="Line O1 Excerpt" height="42" src="http://www.principlesofaccounting.com/chapter16/lineO1.png" width="600" /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;">Emerson’s customers paid $3,000,000 in cash. Emerson’s information system could be sufficiently robust that a “database query” could produce this number. On the other hand, one can infer this amount by reference to sales and receivables data found on the income statement and balance sheet:</span><br />
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">Cash Received From Customers</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">=</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">Total Sales Minus the Increase in Net Receivables (or, plus a decrease in net receivables)</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">=</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">$3,250,000 - ($850,000 - $600,000)</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">=</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">$3,000,000</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;">Accounts receivable increased by $250,000 during the year ($850,000 - $600,000). This means that of the total sales of $3,250,000, a net $250,000 went uncollected. Thus, cash received from customers was $3,000,000. If net receivables had decreased, cash collected would have exceeded sales.</span><br />
<div align="center">
<span style="font-family: Trebuchet MS, sans-serif;"><img alt="Line O2 Excerpt" height="44" src="http://www.principlesofaccounting.com/chapter16/lineO2.png" width="600" /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;">Emerson paid $1,050,000 of cash for inventory. Bear in mind that cost of goods sold is the dollar amount of inventory sold. But, the amount of inventory actually purchased will be less than this amount if inventory on the balance sheet decreased. This would mean that some of the cost of goods sold came from existing stock on hand rather than having all been purchased during the year. On the other hand, purchases would be greater than cost of goods sold if inventory increased.</span><br />
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">Inventory Purchased</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">=</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">Cost of Goods Sold Minus the Decrease in Inventory (or, plus an increase in inventory)</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">=</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">$1,160,000 - ($220,000 - $180,000)</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">=</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">$1,120,000</span></div>
<span style="font-family: Trebuchet MS, sans-serif;">Inventory purchased is only the starting point for determining cash paid for inventory. Inventory purchased must be adjusted for the portion that was purchased on credit. Notice that Emerson’s accounts payable increased by $70,000 ($270,000 - $200,000). This means that cash paid for inventory purchases was $70,000 less than total inventory purchased:</span><br />
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">Cash Paid for Inventory</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">=</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">Inventory Purchased Minus the Increase in Accounts Payable (or, plus a decrease in accounts payable)</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">=</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">$1,120,000 - ($270,000 - $200,000)</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">=</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">$1,050,000</span></div>
<div align="center">
<span style="font-family: Trebuchet MS, sans-serif;"><img alt="Line O3 Excerpt" height="42" src="http://www.principlesofaccounting.com/chapter16/lineO3.png" width="600" /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;">Emerson paid $480,000 of cash for wages during the year. Emerson’s payroll records would indicate the amount of cash paid for wages, but this number can also be determined by reference to wages expense in the income statement and wages payable on the balance sheet:</span><br />
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">Cash Paid for Wages</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">=</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">Wages Expense Plus the Decrease in Wages Payable (or, minus an increase in wages payable)</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">=</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">$450,000 + ($50,000 - $20,000)</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">=</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;">$480,000</span></div>
<div class="equation" style="color: #990000; font-size: 14px; font-weight: bold; text-align: center;">
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;">Emerson not only paid out enough cash to cover wages expense, but an additional $30,000 as reflected by the overall decrease in wages payable. If wages payable had increased, the cash paid would have been less than wages expense.</span><br />
<div align="center">
<span style="font-family: Trebuchet MS, sans-serif;"><img alt="Line O4, O5, O6 Excerpt" height="86" src="http://www.principlesofaccounting.com/chapter16/lineO4.png" width="600" /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;">Emerson’s cash payments for these items equaled the amount of expense in the income statement. Had there been related balance sheet accounts (e.g., interest payable, taxes payable, etc.), then the expense amounts would need to be adjusted in a manner similar to that illustrated for wages.</span><br />
<span style="font-family: Trebuchet MS, sans-serif;">Overall, operations generated net positive cash flows of $800,000. Notice that two items within the income statement were not listed in the operating activities section of the cash flow statement:</span><br />
<ul>
<li><span style="font-family: Trebuchet MS, sans-serif;">Depreciation is not an operating cash flow item. It is a noncash expense. Remember that depreciation is recorded via a debit to Deprecation Expense and a credit to Accumulated Depreciation. No cash is impacted by this entry (the “investing” cash outflow occurred when the asset was purchased), and</span></li>
<li><span style="font-family: Trebuchet MS, sans-serif;">The gain on sale of land in the income statement does not appear in the operating cash flows section. While the land sale may have produced cash, the entire proceeds will be listed in the investing activities section; it is a “nonoperating” item.</span></li>
</ul>
<div class="head-2" style="color: black; font-size: 14px; font-style: italic; font-weight: bold; padding-bottom: 10px; padding-top: 10px; text-transform: uppercase;">
<span style="font-family: Trebuchet MS, sans-serif;">INVESTING ACTIVITIES</span></div>
<span style="font-family: Trebuchet MS, sans-serif;">The next major section of the cash flow statement is the cash flows from investing activities. This section can include both inflows and outflows related to investment-related transactions. Emerson Corporation had one example of each; a cash inflow from sale of land, and a cash outflow for the purchase of equipment. The sale of land requires some thoughtful analysis.</span><br />
<span style="font-family: Trebuchet MS, sans-serif;">Notice that the statement of cash flows for Emerson reports the following line item:</span><br />
<div align="center">
<span style="font-family: Trebuchet MS, sans-serif;"><img alt="Line I1 Excerpt" height="42" src="http://www.principlesofaccounting.com/chapter16/lineI1.png" width="600" /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="font-family: Trebuchet MS, sans-serif;">This line item reports that $750,000 of cash was received from the sale of land during the year. In actuality, it would be possible to look up this transaction in the company’s journal. That entry would appear as follows:</span><br />
<div align="center">
<span style="font-family: Trebuchet MS, sans-serif;"><img alt="Sale of Land Journal Entry" height="104" src="http://www.principlesofaccounting.com/chapter16/landje.png" width="600" /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<div style="text-align: justify;">
<span style="font-family: Trebuchet MS, sans-serif;">But, it is not necessary to refer to the journal. Notice that land on the balance sheet decreased by $600,000 ($1,400,000 - $800,000), and that the income statement included a $150,000 gain. Applying a little “forensic” accounting allows one to deduce that $600,000 in land was sold for $750,000, to produce the $150,000 gain.</span></div>
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<span style="font-family: Trebuchet MS, sans-serif;"><img alt="Line I2 Excerpt" height="42" src="http://www.principlesofaccounting.com/chapter16/lineI2.png" width="600" /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;">Emerson purchased equipment for $150,000 during the year. Notice that equipment on the balance sheet increased by $150,000 ($1,050,000 - $900,000). One could confirm that this was a cash purchase by reference to the journal; such is assumed in this case.</span><br />
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<span style="font-family: Trebuchet MS, sans-serif;"><br /></span></div>
<div class="head-2" style="color: black; font-size: 14px; font-style: italic; font-weight: bold; padding-bottom: 10px; padding-top: 10px; text-transform: uppercase;">
<span style="font-family: Trebuchet MS, sans-serif;">FINANCING ACTIVITIES</span></div>
<div align="center">
<span style="font-family: Trebuchet MS, sans-serif;"><img alt="Line F1 Excerpt" height="42" src="http://www.principlesofaccounting.com/chapter16/lineF1.png" width="600" /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="font-family: Trebuchet MS, sans-serif;">This line reveals that $80,000 was received from issuing common stock. This cash inflow is suggested by the $10,000 increase in common stock ($910,000 - $900,000) and $70,000 increase in additional paid-in capital ($370,000 - $300,000).</span><br />
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<span style="font-family: Trebuchet MS, sans-serif;"><img alt="Line F2 Excerpt" height="48" src="http://www.principlesofaccounting.com/chapter16/lineF2.png" width="600" /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="font-family: Trebuchet MS, sans-serif;">The statement of retained earnings reveals that Emerson declared $50,000 in dividends. Since there is no dividend payable on the balance sheet, one can assume that all of the dividends were paid.</span><br />
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<span style="font-family: Trebuchet MS, sans-serif;"><img alt="Line F3 Excerpt" height="42" src="http://www.principlesofaccounting.com/chapter16/lineF3.png" width="600" /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="font-family: Trebuchet MS, sans-serif;">The balance sheet reveals a $900,000 decrease in long-term debt ($1,800,000 - $900,000). This represented a significant use of cash.</span><br />
<div class="head-2" style="color: black; font-size: 14px; font-style: italic; font-weight: bold; padding-bottom: 10px; padding-top: 10px; text-transform: uppercase;">
<span style="font-family: Trebuchet MS, sans-serif;">CASH FLOW RECAP</span></div>
<div align="center">
<span style="font-family: Trebuchet MS, sans-serif;"><img alt="Line C1 Excerpt" height="101" src="http://www.principlesofaccounting.com/chapter16/lineC1.png" width="600" /></span></div>
<span style="font-family: Trebuchet MS, sans-serif;"><br /></span>
<span style="font-family: Trebuchet MS, sans-serif;">Emerson had a $530,000 increase in cash during the year ($800,000 from positive operating cash flow, $600,000 from positive investing cash flow, and $870,000 from negative financing cash flow). This change in cash is confirmed by reference to the beginning and ending cash balances.</span><br />
<span style="font-family: Trebuchet MS, sans-serif;"><span class="Apple-style-span" style="font-size: 14px; font-style: italic; font-weight: bold; text-transform: uppercase;"><span class="Apple-style-span" style="font-size: 14px; font-style: italic; font-weight: bold; text-transform: uppercase;"><br /></span><br />NON CASH INVESTING/FINANCING ACTIVITIES</span><span class="Apple-style-span" style="color: #3d3c3c; font-size: 11px;"><span class="Apple-style-span" style="color: black; font-size: 12px;"></span></span></span><br />
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<span class="Apple-style-span" style="color: #3d3c3c; font-size: 11px;"><span class="Apple-style-span" style="color: black; font-family: Trebuchet MS, sans-serif; font-size: 12px;"><img alt="Line N1 Excerpt" height="41" src="http://www.principlesofaccounting.com/chapter16/lineN1.png" width="600" /></span></span></div>
<span style="font-family: Trebuchet MS, sans-serif;"><span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black;">The noncash investing and financing section reports that preferred stock was issued for a building.</span></span><span class="Apple-style-span" style="font-style: italic; font-weight: bold; text-transform: uppercase;"><br /></span></span><br />
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<span style="font-family: Trebuchet MS, sans-serif;"><span class="Apple-style-span" style="font-style: italic; font-weight: bold; text-transform: uppercase;">RECONCILIATION</span><span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black;"> The statement of cash flows just presented is known as the “<em style="color: #990000; font-style: normal; font-weight: bold;"><a href="http://www.blogger.com/blogger.g?blogID=8102870735351064242" id="direct" name="direct"></a>direct approach</em>.” It is so named because the cash items entering into the determination of operating cash flow are specifically identified. In many respects, this presentation of operating cash flows resembles a cash basis income statement. An acceptable alternative is the “indirect” approach. Before moving on to the indirect approach, be aware that companies using the direct approach must supplement the cash flow statement with a reconciliation of income to cash from operations. This reconciliation may be found in notes accompanying the financial statements:</span></span></span><br />
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<span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black; font-family: Trebuchet MS, sans-serif;"><img alt="Reconciliation Example" height="223" src="http://www.principlesofaccounting.com/chapter16/reconciliation.png" width="600" /></span></span></div>
<span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black; font-family: Trebuchet MS, sans-serif;">Notice that this reconciliation starts with the net income, and adjusts to the $800,000 net cash from operations. Some explanation may prove helpful:</span></span><br />
<ul><span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black; font-family: Trebuchet MS, sans-serif;">
<li>Depreciation is added back to net income, because it reduced income but did not consume any cash.</li>
<li>Gain on sale of land is subtracted, because it increased income, but is not related to operations (remember, it is an investing item and the “gain” is not the sales price).</li>
<li>Increase in accounts receivable is subtracted, because it represents uncollected sales included in income.</li>
<li>Decrease in inventory is added, because it represents cost of sales from existing inventory (not a new cash purchase).</li>
<li>Increase in accounts payable is added, because it represents expenses not paid.</li>
<li>Decrease in wages payable is subtracted, because it represents a cash payment for something expensed in an earlier period.</li>
</span></span></ul>
<span style="font-family: Trebuchet MS, sans-serif;"><span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black;">This can become rather confusing. Most can probably see why depreciation is added back. But, the gain may be fuzzy. It must be subtracted because one is trying to remove it from the operating number; it increased net income, but it is viewed as something other than operating, and that is why it is backed out. Conversely, a loss on such a transaction would be added.</span></span><span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black;"><br /></span></span></span></div>
<div>
<span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black; font-family: Trebuchet MS, sans-serif;">The following drawing is useful in simplifying consideration of how changes in current assets and current liabilities result in reconciliations of net income to operating cash flows. Begin by thinking about a reconciling item that is fairly easy to grasp. Emerson’s accounts receivable increased on the balance sheet, but the amount of the increase was subtracted in the reconciliation (again, this increase reflects sales not yet collected in cash, and thus the subtracting effect). In the drawing below, consider that accounts receivable is a current asset, and it increased. This condition relates to the upper left quadrant; hence the increase is shown as “subtracted.”</span></span></div>
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<span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black; font-family: Trebuchet MS, sans-serif;">Using the accounts receivable analysis as a benchmark, it then becomes logical that all increasing current assets result in subtractions in the reconciliation. This relationship is inversed for current liabilities, as shown in the upper right quadrant of the drawing. Similarly, these relationships are further inversed for account decreases as shown in the bottom half of the drawing. With the drawing it mind, it becomes a simple matter to examine changes in specific current accounts to determine whether they are generally added or subtracted in the reconciliation of net income to cash flows <span class="Apple-style-span" style="font-size: 12px;">from operating activities.</span></span></span><br />
<div align="center" style="font-size: 12px;">
<span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black; font-family: Trebuchet MS, sans-serif;"><img alt="Reconciliation Illustration" height="263" src="http://www.principlesofaccounting.com/chapter16/reconillustration.png" width="500" /></span></span></div>
<span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black; font-family: Trebuchet MS, sans-serif;"><br /></span></span>
<div class="styleburgundy" style="border-width: 0px; color: white; font-size: 16px; font-weight: bold; padding: 8px; text-transform: capitalize;">
<span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black; font-family: Trebuchet MS, sans-serif;"><a href="http://www.blogger.com/blogger.g?blogID=8102870735351064242" id="Indirect" name="Indirect"></a>Indirect Approach To Presenting Operating Activities</span></span></div>
<span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black; font-family: Trebuchet MS, sans-serif;"><a href="http://www.principlesofaccounting.com/youtube_player/player.html?filename=GXbk2o8-KhM" style="font-size: 12px;" target="_blank"><img align="right" alt="Video Lecture" border="0" height="40" hspace="10" src="http://www.principlesofaccounting.com/images/videoburgundy.png" width="145" /></a><span class="Apple-style-span">Although accounting standards encourage the direct approach, most companies actually present an indirect statement of cash flows. The <a href="http://www.blogger.com/blogger.g?blogID=8102870735351064242" id="indirect" name="indirect"></a></span><em style="color: #990000; font-style: normal; font-weight: bold;">indirect approach</em><span class="Apple-style-span"> is so named because the “reconciliation” replaces the direct presentation of the operating cash flows. Except for the shaded areas, this statement is identical to the direct approach. The first shaded area reflects the substitution of the operating cash flow calculations. The second shaded area reflects that the indirect approach must be supplemented with information about cash paid for interest and taxes.</span></span></span><br />
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<span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black; font-family: Trebuchet MS, sans-serif;"><img alt="Emerson Corporation Indirect Statement" height="737" src="http://www.principlesofaccounting.com/chapter16/emersonindirect.png" width="600" /></span></span></div>
<span class="Apple-style-span" style="color: #3d3c3c;"><span class="Apple-style-span" style="color: black; font-family: Trebuchet MS, sans-serif;"></span></span></div>
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<span class="Apple-style-span" style="font-size: 11px;"><span class="Apple-style-span" style="color: blue; font-family: Trebuchet MS, sans-serif;">Sources: principlesofaccounting.com , kkhsou.in</span></span></div>
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Anonymousnoreply@blogger.com1tag:blogger.com,1999:blog-8102870735351064242.post-77366148353983417962012-07-14T22:33:00.000-07:002012-07-14T22:38:36.610-07:00Fund Flow Statement Analysis<div dir="ltr" style="text-align: left;" trbidi="on">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b>Fund Flow Statement :</b></span><br />
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br /></span><br />
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">A fund flow statement is a statement which explains the various sources from which funds were raised and the uses to which these funds were put. A fund flow shows the sources from which the funds are received and the uses (or applications) to which these have been put. In other words, a fund flow statement is used to explain the movement of working capital.<br /><br />Working capital is defined as the difference between current assets and current liabilities. Working capital determines the liquidity position of the company. As a historical analysis, the statement of changes in working capital reveals to management the way in which working capital has been obtained and used. With this insight, management can prepare the estimates of the working capital flows. A statement reporting the changes in working capital is useful in addition to the financial statement. </span><br />
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b>Sources of Fund/ Working capital:</b><br />The typical sources of working capital are summarised below:<br />(i) Funds from operations (adjusted net income)<br />(ii) Sale of non-current assets:<br />a. Sale of long-term investments (shares, bonds debentures etc)<br />b. Sale of tangible fixed assets like land, building, plant, or equipments.<br />c. Sale of intangible fixed goodwill, patens, or copyrights.<br />(iii) Long-term financing:<br />a. Long-term borrowings (institutional loans, debentures, bonds etc.)<br />b. Issuance of equity and preference shares<br />(iv) Short-term financing such as bank borrowings.<br /><br /><b>Uses/Application of Fund/ working capital</b><br />The uses of working capital are as follows:<br />(i) Adjusted net loss operations,<br /><br />(ii) Purchase of non-current assets:<br /><br />a. Purchase of long-term investments like shares, bonds /debentures etc.<br />b. Purchase of tangible fixed assets, like land, building, plant, machinery, equipment etc.<br />c. Purchase of intangible fixed assets, like goodwill, patents, copyrights etc.<br /><br />(iii) Repayment of long-term debt (debentures or bonds) and short-term debt (bank borrowing),<br />(iv) Redemption of redeemable preference shares<br />(v) Payment of cash dividend.</span><br />
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<h2 style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; line-height: 1.3em; margin-bottom: 5px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none; vertical-align: baseline; white-space: normal;">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Funds Flow Statement vs Cash Flow Statement</span></h2>
<div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; line-height: 1.5em; margin-bottom: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none; vertical-align: baseline; white-space: normal;">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">The <strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none; vertical-align: baseline; white-space: normal;">cash flow statement is different from the fund flow statement</strong> in its approach. The difference between the two can be summarized as follows:<br style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none; vertical-align: baseline; white-space: normal;" />1. The fund flow statement is based on the concept of working capital, whereas the cash flow statement is based on cash which is only one of the elements of working capital.<br style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none; vertical-align: baseline; white-space: normal;" />2. The fund flow statement provides the details of funds movements, whereas cash flow statement provides the details of cash movements.<br style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none; vertical-align: baseline; white-space: normal;" />3. Fund flow statement considers the movement of the funds as defined in terms of net working capital, whereas the cash flow statement considers only the actual movement of funds.<br style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none; vertical-align: baseline; white-space: normal;" />4. In fund flow statement, net increase or decrease in working capital is recorded while in cash flow statement; individual item involving cash is taken into account.<br style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none; vertical-align: baseline; white-space: normal;" />5. Funds flow statement is started with the opening cash balance and closed with the closing cash balance records only cash transactions, whereas cash flow statement is started with the opening cash balance and closed with ht closing cash balance while there a no opening or closing balances in Funds Flow Statement.</span></div>
<div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; line-height: 1.5em; margin-bottom: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none; vertical-align: baseline; white-space: normal;">
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<h3 style="text-align: left;">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="line-height: 19px;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Steps for preparing Fund flow statement:</strong></span></span></h3>
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="line-height: 19px;"><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">First Step</strong><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Making of statement of Changes of Working Capital</strong><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />For making of fund flow statement. It is very necessary to make statement of changes of working capital. Because net increase in working capital is use of fund and net decrease in working capital is source of fund. So, it is duty of accountant to make statement of changes of working capital. Making of statement of changes working capital is very easy and simple.<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />We take two balance sheets, one is current year balance sheet and other is previous year balance sheet. Then we separate current assets and current liabilities.<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />If current assets are more than previous year current assets, it means increase in working capital.<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />If current assets are less than previous year current assets, it means decrease in working capital. Because, relationship between current assets and working capital is positive and if any changes in current assets, working capital will change in same direction.<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />If current liabilities are more than previous year current liabilities, it means decrease in working capital.<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />If current liabilities are less than previous year current liabilities, it means increase in working capital. Relationship between working capital and current liabilities are inverse.<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Statement or schedule of changes in working capital</strong><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />----------------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Particular--------------- ↓ previous year ↓ Current year ↓ Effect on working capital<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />-----------------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />-----------------------------------------------------------↓ Increase ↓ Decrease<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />----------------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Current Assets</strong><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Cash in hand<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Bills receivable<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Sundry debtors<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Temporary investments<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Stocks / inventories<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Prepaid expenses<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Accrued incomes<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />--------------------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Total current assets----------- ↓xxxx ↓ xxxxx↓<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />----------------------------------------------------------------------- -----------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Current liabilities</strong><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Bills payables<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Sundry creditors<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Bank overdraft<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Short term advances<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Dividends payables<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Provision for taxation<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />---------------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Total current Liabilities ----------↓xxxx ↓xxxx ↓<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />------------------------------------------------------------------ -------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Working capital<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />CA- CL<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />---------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Net increase or decrease in working capital =<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Increase in working capital – Decrease in working capital<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">2nd Step<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Statement showing the fund from operation</strong><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Because is the source of fund and will show in fund flow statement’s source side. So before making fund flow statement, we must make statement showing the fund from operation.<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Operation means business activity and fund from operation means profit from business activity. So, you will easy understand that profit from business activity between two accounting period must be the source of fund.<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Statement of fund from operations</strong><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />------------------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />------------------------------------------------------------------------>↓ Amount ↓<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />-------------------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Closing balance of profit and loss account or retained earning as<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Given in the Balance sheet<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><br /></span></strong></span></span><br />
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="line-height: 19px;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Add </span></strong><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">non –fund and non operating items which have been already Debited to profit and loss account </strong>1. depreciation<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />2. amortization of fictitious and intangible assets<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ goodwill<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ patents<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ trade marks<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ preliminary expenses<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ discount on issue of shares<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />3. Appropriation of retained earning such as<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Transfer to general reserve<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Dividend equalization fund<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Transfer to sinking fund<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Contingency reserve etc.<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />4. Loss on sale of any non current or fixed assets such as<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Loss on sale of land and building<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Loss on sale of machinery<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Loss on sale of furniture<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Loss on sale of long term investments<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />5. Dividends including<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Interim dividend<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Proposed dividend<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />(If it is an appropriation of profit and not taken as current liability)<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />6. Provision for taxation (if it is not taken as current liability)<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />7. Any other non fund / non operating items which have been debited to P/L account<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />-----------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Total ( A)-------------------------------------------------------> ↓ XXXXX ↓<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />-------------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><span style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Less</strong></span> <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Non –Fund or non operating items which have already been credited to profit and loss account</strong><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />1. Profit or gain from the sale of non current / fixed assets such as<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Profit on sale of land and building<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Profit on sale of plant and machinery<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Þ Profit on sale of long term investment etc.<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />2. Appreciation in the value of fixed assets such as increase in the value of land if it has been credited to profit and loss account<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />3. Dividends received<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />4. excess provision retransferred to profit and loss account or written back .<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />5. any other non operating item which has been credited to profit and loss account<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />6. opening balance of profit and loss account or retained earnings as given in the balance sheet<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />-------------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Total ( B)--------------------------------------------------------------> ↓ XXXXX ↓<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />----------------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Funds received from operation or business activities = total ( A) – Total ( B)<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />You can make also above statement in t shape adjusted profit and loss account form .<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">3rd Step<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />Fund flow statement</strong><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />--------------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />-------------------------------------------------------------------> ↓ Amount ↓<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />-------------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Source of funds</strong></span></span><br />
<ol style="line-height: 1.6em; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 12px; padding-left: 30px; padding-right: 0px; padding-top: 12px; text-align: left;">
<li style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 8px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">fund from operation ( balance of second step )</span></li>
<li style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 8px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">issue of shares capital</span></li>
<li style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 8px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">issue of debentures</span></li>
<li style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 8px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">raising of long term loans</span></li>
<li style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 8px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">receipts from partly paid shares , called up</span></li>
<li style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 8px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">amount received from sales of non current or fixed assets</span></li>
<li style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 8px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">non trading receipts such as dividend received</span></li>
<li style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 8px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">sale of investments ( Long term )</span></li>
</ol>
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; line-height: 25px;">decrease in working capital as per schedule of changes in working capital<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />----------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />total -------------------------------------------------------------> ↓ XXXXX ↓<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" />---------------------------------------------------------------------------------<br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Applications or uses of funds</strong></span><br />
<ul style="text-align: left;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; line-height: 25px;">
<li>1. Funds lost in operations ( Balance negative in second step )</li>
<li><span class="Apple-style-span" style="line-height: 19px;">2. redemption of preference share capital</span></li>
<li><span class="Apple-style-span" style="line-height: 19px;">3. redemption of debentures</span></li>
<li><span class="Apple-style-span" style="line-height: 19px;">4. repayment of long term loans</span></li>
<li><span class="Apple-style-span" style="line-height: 19px;">5. purchase of long term loans</span></li>
<li><span class="Apple-style-span" style="line-height: 19px;">6. purchase of long term</span><span class="Apple-style-span" style="line-height: 19px;"><a href="http://www.svtuition.org/2010/02/investment.html" style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none;"> investments</a></span></li>
<li><span class="Apple-style-span" style="line-height: 19px;">7. non trading payments</span></li>
<li><span class="Apple-style-span" style="line-height: 19px;">8. payment of tax</span></li>
<li><span class="Apple-style-span" style="line-height: 19px;">9. payment of dividends</span></li>
<li><span class="Apple-style-span" style="line-height: 19px;">10. increase in working capital ( As per positive balance of ist step )</span></li>
</span></ul>
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; line-height: 25px;">
</span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="line-height: 19px;">-------------------------------------------------------------------------------------</span><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /><span class="Apple-style-span" style="line-height: 19px;">total --------------------------------------------------------> ↓ </span><span class="blsp-spelling-error" id="SPELLING_ERROR_0" style="line-height: 19px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">XXXXX</span><span class="Apple-style-span" style="line-height: 19px;"> ↓</span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="line-height: 19px;">--------------------------------------------------------------------------------------</span></span><div>
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="line-height: 19px;"><br /></span></span></div>
<div>
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b><span class="Apple-style-span" style="line-height: 19px;">Example</span><span class="Apple-style-span" style="line-height: 19px;"> of Fun Flow Statement:</span></b></span></div>
<div>
<span class="Apple-style-span" style="color: #333333; font-family: arial; font-size: 11px;"><strong><u>Fund Flow Statement</u></strong><br />
<table bgcolor="#cccccc" border="0" cellpadding="1" cellspacing="1" class="grayaddtext" style="color: rgb(51, 51, 51) !important; font-family: arial; font-size: 11px; padding-bottom: 5px; padding-left: 5px; padding-right: 5px; padding-top: 2px; text-align: left; text-decoration: none;"><tbody>
<tr><td bgcolor="#e4e4e4" colspan="4" valign="top" width="590"><div align="right">
Rs. Lakh</div>
</td></tr>
<tr><td bgcolor="#e4e4e4" valign="top" width="257"><strong>Long term Sources</strong></td><td bgcolor="#e4e4e4" valign="top" width="38"></td><td bgcolor="#e4e4e4" valign="top" width="215"><div align="center">
<strong>Long Term Uses</strong></div>
</td><td bgcolor="#e4e4e4" valign="top" width="80"></td></tr>
<tr><td bgcolor="#ffffff" valign="top" width="257">Increase in capital</td><td bgcolor="#ffffff" valign="top" width="38"><div align="center">
20</div>
</td><td bgcolor="#ffffff" valign="top" width="215">Purchase of fixed assets</td><td bgcolor="#ffffff" valign="top" width="80"><div align="center">
125</div>
</td></tr>
<tr><td bgcolor="#ffffff" valign="top" width="257">Profit from operations</td><td bgcolor="#ffffff" valign="top" width="38"><div align="center">
104</div>
</td><td bgcolor="#ffffff" valign="top" width="215">Investment in associates</td><td bgcolor="#ffffff" valign="top" width="80"><div align="center">
56</div>
</td></tr>
<tr><td bgcolor="#ffffff" valign="top" width="257">Increase in long term loan</td><td bgcolor="#ffffff" valign="top" width="38"><div align="center">
40</div>
</td><td bgcolor="#ffffff" valign="top" width="215">Profit withdrawn</td><td bgcolor="#ffffff" valign="top" width="80"><div align="center">
50</div>
</td></tr>
<tr><td bgcolor="#ffffff" valign="top" width="257">Long term deficit</td><td bgcolor="#ffffff" valign="top" width="38"><div align="center">
67</div>
</td><td bgcolor="#ffffff" valign="top" width="215"></td><td bgcolor="#ffffff" valign="top" width="80"> </td></tr>
<tr><td bgcolor="#e4e4e4" valign="top" width="257"><strong>Total</strong></td><td bgcolor="#e4e4e4" valign="top" width="38"><div align="center">
<strong>231</strong></div>
</td><td bgcolor="#e4e4e4" valign="top" width="215"><strong>Total</strong></td><td bgcolor="#e4e4e4" valign="top" width="80"><div align="center">
<strong>231</strong></div>
</td></tr>
<tr><td bgcolor="#ffffff" valign="top" width="257"><strong>Short Term Sources</strong></td><td bgcolor="#ffffff" valign="top" width="38"><div align="center">
<br /></div>
</td><td bgcolor="#ffffff" valign="top" width="215"><strong>Short Term Uses</strong></td><td bgcolor="#ffffff" valign="top" width="80"><div align="center">
<br /></div>
</td></tr>
<tr><td bgcolor="#ffffff" valign="top" width="257">Increase in CC</td><td bgcolor="#ffffff" valign="top" width="38"><div align="center">
15</div>
</td><td bgcolor="#ffffff" valign="top" width="215">Incraese in inventory</td><td bgcolor="#ffffff" valign="top" width="80"><div align="center">
35</div>
</td></tr>
<tr><td bgcolor="#ffffff" valign="top" width="257">Increase in Trade Creditors</td><td bgcolor="#ffffff" valign="top" width="38"><div align="center">
80</div>
</td><td bgcolor="#ffffff" valign="top" width="215">Increase in receivables</td><td bgcolor="#ffffff" valign="top" width="80"><div align="center">
5</div>
</td></tr>
<tr><td bgcolor="#ffffff" valign="top" width="257">Increase in Other Current Liabilities</td><td bgcolor="#ffffff" valign="top" width="38"><div align="center">
5</div>
</td><td bgcolor="#ffffff" valign="top" width="215">Short term surplus</td><td bgcolor="#ffffff" valign="top" width="80"><div align="center">
67</div>
</td></tr>
<tr><td bgcolor="#ffffff" valign="top" width="257">Decrease in cash</td><td bgcolor="#ffffff" valign="top" width="38"><div align="center">
2</div>
</td><td bgcolor="#ffffff" valign="top" width="215"></td><td bgcolor="#ffffff" valign="top" width="80"><div align="center">
<br /></div>
</td></tr>
<tr><td bgcolor="#ffffff" valign="top" width="257">Decrease in other current assets</td><td bgcolor="#ffffff" valign="top" width="38"><div align="center">
5</div>
</td><td bgcolor="#ffffff" valign="top" width="215"></td><td bgcolor="#ffffff" valign="top" width="80"><div align="center">
<br /></div>
</td></tr>
<tr><td bgcolor="#e4e4e4" valign="top" width="257"><strong>Total</strong></td><td bgcolor="#e4e4e4" valign="top" width="38"><div align="center">
<strong>107</strong></div>
</td><td bgcolor="#e4e4e4" valign="top" width="215"><strong>Total</strong></td><td bgcolor="#e4e4e4" valign="top" width="80"><div align="center">
<strong>107</strong></div>
<div>
<strong><br /></strong></div>
</td></tr>
</tbody></table>
</span></div>
<div>
<span class="Apple-style-span" style="color: blue; font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="line-height: 19px;">Sources :</span></span></div>
<div>
<br />
<span class="Apple-style-span" style="color: blue; font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="line-height: 19px;">svtuition.org , </span></span><span class="Apple-style-span" style="color: blue; font-family: Arial, Helvetica, sans-serif; line-height: 19px;">kkhsou.in , .cab.org.in.</span></div>
</div>Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-17825436288666242142012-07-14T21:35:00.002-07:002013-02-06T16:29:58.482-08:00Revenues and Expenses<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<h2 style="text-align: left;">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: small;">Revenues:</span></h2>
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Formal Definition:The gross increase in owner's equity resulting from the operations and other activities of the business.</span><br />
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Informal Definition:Amounts a business earns by selling services and products and investing. Amounts billed to customers for services and/or products.</span><br />
<br />
<ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b>Operating Revenue</b><br />Revenues resulting from the normal operations of a business such as the revenues resulting from the sale of products and services to your customers.</span><br />
<ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Sales</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Products</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Services</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Sales Discounts (Contra-Revenue Account)</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Sales Returns and Allowances (Contra-Revenue Account)</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b>Non-Operating Revenue and Gains</b><br />Non-operating revenue accounts include all types of income that you receive that are not part of your main line of business. In other words, revenues or gains resulting from something other than from normal business operations.</span><br />
<ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Interest Income</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Dividends</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Commissions</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Rental Income</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Gain On Sale Of Assets</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Gains -Other Unusual</span></li>
</ul>
</li>
</ul>
<br />
<h2 style="text-align: left;">
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: small;">Expenses:</span></h2>
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Formal Definition:Decrease in owner's equity resulting from the cost of goods, fixed assets, and services and supplies consumed in the operations of a business.</span><br />
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Informal Definition:The costs of doing business. The stuff we used and had to pay for or charge to run our business.</span></div>
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<ul style="text-align: left;">
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b>Cost of Sales or Cost of Goods Sold</b><br />Cost of Goods Sold - the cost of the products purchased or manufactured and sold by a business.</span><div>
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<ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Cost Of Goods Purchased and Sold</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Purchases<br />A temporary account used in the periodic inventory system to record the purchases of merchandise for resale. This account reports the gross amount of purchases of merchandise. Net purchases is the amount of purchases minus purchase returns, purchase allowances, and purchase discounts. While the Purchases Accounts are normally classified as temporary expense accounts, they are actually "hybrid" accounts. The purchase accounts are used along with freight and the beginning and ending inventory to determine the Cost Of Goods Sold.</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Purchase Discounts (Contra Account)</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Purchase Returns and Allowances (Contra Account)</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Freight</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Cost Of Goods Manufactured and Sold</span></li>
</ul>
</li>
</ul>
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<ul style="text-align: left;">
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b>Operating Expenses</b> </span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Operating Expenses - the expenses related to normal daily operations such as wages, rent, advertising, insurance, etc. These expenses are related to the normal operations of the business (primary activities) and are incurred in order to earn normal operating revenues. In other words, amounts spent on products and services related to normal business operations.</span><div>
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">While not absolutely necessary, the Operating Expenses are often grouped into two main functional areas of operation:</span></div>
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</div>
<ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Selling Expenses<br />Selling Expenses are expenses incurred and related to making sales. Examples are sales salaries & wages, fringe benefits, advertising, travel, entertainment, catalogues, rent, utilities, telephone, commissions, warehousing, shipping, depreciation, office supplies, postage, etc.</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">General and Administrative Expenses (G&A)<br />G & A Expenses are related to the general operations or overall administration of the business. Examples are administrative salaries & wages (officers, office, accounting, management, and human resources), fringe benefits, supplies, rent, utilities, telephone, travel, entertainment, depreciation, office supplies, postage, legal & accounting fees, etc.</span></li>
</ul>
<div>
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">The following listing of types of expenses, where needed, can be used and included in both groups. There are no rigid rules as to the order that the operating expenses are listed within a category.</span></div>
<div>
</div>
<ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Salaries and Wages</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Salaries - Other</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Salaries - Officers</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Wages - Regular</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Wages - Overtime</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Incentive Pay</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Commissions</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Bonuses</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Severance Pay</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Required Payroll Related Expenses</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Employer FICA</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Employer Medicare</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Workers’ Compensation Insurance</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Federal Unemployment</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">State Unemployment</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Fringe Benefits</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Vacation Pay</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Holiday Pay</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Sick Pay</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other Paid Leave</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Parking</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Meals</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Employer Provided Health Insurance</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Employer Provided Life Insurance</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Employer Provided 401 K Contributions</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Employer Provided IRA Contributions</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Employer Provided Pensions & Retirement</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other Employer Provided Benefits</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Employee Recruitment</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Travel</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Lodging</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Meals</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Entertainment</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Advertising</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Employment Agency Fees</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Temporary Help</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Cash Over / Short</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Supplies Expense</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Operating Supplies</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Maintenance Supplies</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Cleaning Supplies</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Office Supplies</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Computer Supplies</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other Supplies</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Rent Expense</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Land</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Buildings</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Equipment</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Vehicles</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Leasing Expense</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Land</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Buildings</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Equipment</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Vehicles</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Repairs & Maintenance</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Buildings</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Grounds</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Equipment</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Office</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Store</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Manufacturing</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Vehicles</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Vehicle Operating Expenses</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Delivery Expenses</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Insurance Expense</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Building & Contents</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Vehicles</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Business Interruption</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Casualty</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Product Liability</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Professional Liability</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Fees , Licenses, and Permits</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Security</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Janitorial Services</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Uniforms</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Bank Charges and Fees</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Credit Card Fees</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Postage</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Cleaning</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Memberships</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Subscriptions</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Training and Education</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Tuition and Fees</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Transportation</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Lodging</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Meals</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Travel</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Travel - Overnight</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Lodging - Overnight</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Transportation - Overnight</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Meals - Overnight</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other - Overnight</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Travel - Local</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Lodging - Local</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Transportation - Local</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Meals - Local</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other - Local</span></li>
</ul>
</li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Entertainment</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Meals</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Gifts</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Events</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Catalogues and Publications</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Advertising</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">TV Ads</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Radio Ads</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Newspaper & Magazine Ads</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Internet Ads</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Website</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Promotional Events</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Royalties</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Franchise Fees</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Professional Fees</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Legal</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Auditing</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Accounting</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Tax Preparation</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Consulting</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Utilities</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Electricity</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Gas</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Water</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Garbage Collection</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Telephone</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Internet Access & Services</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Credit and Collections</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Bad Debts Expense</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Collection Expense</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Credit Reports & Background Checks</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Depreciation Expense</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Depreciation - Vehicles</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Depreciation - Buildings</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Depreciation - Building Improvements</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Depreciation - Machinery and Equipment</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Depreciation - Office Equipment</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Depreciation - Computer Equipment</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Depreciation - Vehicles</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Depreciation - Furniture & Fixtures</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Depreciation - Computer Software</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Depreciation - Other Property, Plant, or Equipment</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Amortization</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Amortization - Leasehold Improvements</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Amortization - Goodwill</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Amortization - Organization Costs</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Amortization - Other</span></li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Property Taxes</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Personal Property</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Real Property</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other</span></li>
</ul>
</li>
</ul>
</li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b>Non-Operating Expenses and Losses</b><br />Amounts spent on products and services not related to normal business operations (secondary activities). In other words, expenses and losses resulting from something other than from normal business operations.</span><div>
</div>
<ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Donations</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Penalties & Fines</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Loss On Sale Of Assets</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Losses - Other Unusual</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Interest</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Taxes</span><ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Franchise & Excise Taxes</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Federal Income Taxes</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Other Taxes</span></li>
</ul>
</li>
</ul>
</li>
</ul>
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<div>
<span class="Apple-style-span" style="color: blue; font-family: Arial, Helvetica, sans-serif;">Source :www.dwmbeancounter.com</span></div>
</div>
Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-85045435172223200372012-07-10T18:47:00.002-07:002012-07-10T23:28:01.361-07:00Commercial Bills/Bills of Exchange<div dir="ltr" style="text-align: left;" trbidi="on">
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<strong><span style="font-family: Arial, Helvetica, sans-serif;">Commercial Bill/Bill of Exchange :</span></strong></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">A commercial bill—also called a bank bill or bill of exchange—is a payment order directing your bank to pay a sum of money to the holder of the bill at a future time.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">A commercial bill facility is a flexible credit facility which can give your business a short- or long-term injection of cash to finance an individual export contract or general export growth.</span></div>
<div style="text-align: justify;">
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<div style="text-align: justify;">
<strong><span style="font-family: Arial, Helvetica, sans-serif;">How does it work :</span></strong></div>
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<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">You enter into a commercial bill facility with your bank which allows you to draw one or more bills of exchange for acceptance and discounting by your bank. When establishing a commercial bill facility, you agree with your bank:</span></div>
<ul>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">the maximum and minimum amounts for the facility </span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">the term of the entire facility based on the anticipated funding needs of your business (for example, two years) </span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">the term (or <strong>tenor</strong>) of each bill within the facility. Typically, the term of each bill is between seven and 180 days. The term you select determines the intervals at which you’ll pay interest under the facility. This gives you flexibility to match your interest payments to your business cash flows.</span></div>
</li>
</ul>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">At the start of a commercial bill facility, you draw a bill of exchange which your bank accepts and sells for you at a discount—an amount less than the face value of the bill. The discounted amount is the amount you receive from your bank. The difference between the face value of the bill and the discounted amount represents the interest payable by you to the bank at the end of the bill term.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">At the end of the bill term, you pay your bank the face value of the bill or, if the facility allows you to do so, roll over your debt by drawing a replacement bill for your bank to accept and discount.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">A commercial bill facility may include several rollovers and at each rollover you can choose a different principal amount for the next bill you draw (within the limits set by your bank). This allows you to adjust the amount you borrow to match your business cash flow needs and pay interest only on that amount.</span></div>
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<span style="font-family: Arial;"><strong>Interest Rate :</strong></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The interest rate for bills issued under a commercial bill facility can be fixed or variable. If the interest is fixed, your bank will include a risk premium to cover its exposure to market rate movements.</span></div>
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<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">While you make regular interest payments in a commercial bill facility, you don’t usually have to make regular repayments of principal. At the end of the facility term, you repay the face value of the outstanding bill.</span></div>
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<br /></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Before accepting your bills, many banks or financial institutions will require that you provide security, such as a mortgage or charge over your property and business assets.</span></div>
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<br /></div>
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<span style="color: blue; font-family: Arial, Helvetica, sans-serif;">Source :www.exportfinance.gov.au</span></div>
</div>Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-73358499454806417742012-07-10T02:15:00.003-07:002012-07-10T02:17:29.357-07:00Types of Debentures<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Debenture Definition :</strong></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Debenture (Greek word) means you owe something and is derived from Latin word “debere” meaning “to borrow”. It is a written certificate/instrument signed by the company under its common seal acknowledging debt due by it to its holders. In simple words, through this document:</span></div>
<ul>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Company promises to pay a specific amount of money as stated</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">At a fixed date in future</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Along with periodic interest payment</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">To compensate holders for using their funds.</span></div>
</li>
</ul>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A debenture is a debt instrument similar to a bond. But bonds are secured while debentures are not. However, many people use both the terms interchangeably.</span></div>
<div style="text-align: justify;">
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Advantages/Merits of Debenture Issue:</strong></span></div>
<ul>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">It enables a company to raise funds for a specific period.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">No dilution of control as debenture holders don’t possess voting rights</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Debenture (debt) enables the company to Trade on equity. It can pay dividend to equity shareholders at a rate higher than overall ROI.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Debenture holders entitled to a fixed rate of interest. Eg: 10% debenture</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">They enjoy priority over other unsecured creditors with respect to debt repayment.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Suitable for conservative investors who seek steady ROI with little or no risk.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Interest on debentures is treated as expense and is tax deductible.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Company can adjust its gearing in accordance to its financial plan.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Debenture holders are regarded as creditors of the company and they receive preference over equity shareholders and preference share holders.</span></div>
</li>
</ul>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Disadvantages/Demerits of Debenture issue:</strong></span></div>
<ul>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">They have a fixed maturity; hence provision has to be made for repayment.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">There is a limit to which funds can be raised through debentures.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">It is risky if the company fails to pay interest or principal installment on time, as debenture holders can file petition for winding up the company.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">It is not suitable for a company with fluctuating earnings as it may also lead to fluctuations in payment of dividend payable to equity shareholders.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">With more risk, you get more return. Debentures being secure investments, returns are less.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Like ordinary shares, debenture holders will not be regarded as owners of the company and have no voting rights.</span></div>
</li>
</ul>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Debentures differ on the basis on terms and conditions on which they are issued.</strong></span></div>
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<a href="http://financenmoney.in/wp-content/uploads/2012/01/Kinds-of-debenture-and-bond.jpg"><span style="font-family: Arial, Helvetica, sans-serif;"><strong><img alt="" class="size-large wp-image-665 alignleft" height="228" src="http://financenmoney.in/wp-content/uploads/2012/01/Kinds-of-debenture-and-bond-1024x402.jpg" title="Kinds of debenture and bond" width="581" /></strong></span></a></div>
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<span style="text-decoration: underline;"><span style="font-family: Arial, Helvetica, sans-serif;"><strong>From the point of view of Security:</strong></span></span></div>
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<br /></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Secured/Mortgage Debentures:</strong></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Debentures secured against assets of the company .i.e. if the company is winding up, assets will be sold and debenture holders will be paid back. The charge/mortgage may be fixed or a floating charge. If it is fixed, charge is on a specific asset say plant, machinery etc. If it is floating charge, it means it is on general assets of the company.</span> </div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Which assets are charged:</strong> The ones available with the company presently and also assets in future.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Mortgage deed:</strong> Includes nature/value of the security, date of interest payment, and rate of interest, repayment terms, and rights of the debenture holders if the company defaults. In the event of default of company to pay interest or principal installment, they can recover their money via the assets mortgaged.</span> </div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Unsecured/Naked Debentures:</strong></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Debentures not secured against assets of the company .i.e. if the company is winding up, assets will be not be sold in order to pay the debenture holders. In other words, no charge is created on the assets of the company which means that there is no security of interest and principal payment. The creditworthiness and soundness of the company serves as a security.</span></div>
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<span style="text-decoration: underline;"><span style="font-family: Arial, Helvetica, sans-serif;"><strong><span style="text-decoration: underline;"><span style="font-family: Arial, Helvetica, sans-serif;"><strong><span style="text-decoration: underline;"><span style="font-family: Arial, Helvetica, sans-serif;"><strong>From the point of view of </strong></span></span></strong></span></span>Tenure:</strong></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Redeemable Debentures: </strong></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Debentures which have to be repaid within a certain specified period. Eg: 5% 2 years Rs. 1000 debenture means redeemable period is 2 years(5%:interest/coupon payment). After redemption, they can be reissued.</span></div>
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<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Irredeemable/Perpetual Debentures:</strong> </span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">These can be paid back at any time during the life of the company .i.e. there is no specified period for redemption. Hence they are also called Perpetual Debentures. Nonetheless if the company has to wind up, then they have to repay the debenture holders.</span></div>
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<span style="text-decoration: underline;"><span style="font-family: Arial, Helvetica, sans-serif;"><strong><span style="text-decoration: underline;"><span style="font-family: Arial, Helvetica, sans-serif;"><strong><span style="text-decoration: underline;"><span style="font-family: Arial, Helvetica, sans-serif;"><strong>From the point of view of </strong></span></span></strong></span></span>Registration:</strong></span></span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Registered Debentures: </strong></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">As the name suggested, these are debentures that are registered with the company. It records all details of debenture holdings such as name, address, particulars of holding etc. Interest shall be paid only to the registered holder (treated as a non-negotiable instrument). They can be transferred by a transfer deed.</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Bearer Debentures: </strong></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">These can be transferred by mere delivery. Company does not hold records for the debenture holder. Interest will be paid to the one who displays the interest coupon attached to the debenture. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong></strong></span></div>
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<span style="text-decoration: underline;"><span style="font-family: Arial, Helvetica, sans-serif;"><strong><span style="text-decoration: underline;"><span style="font-family: Arial, Helvetica, sans-serif;"><strong>From the point of view of </strong></span></span>Coupon:</strong></span></span></div>
<div style="text-align: justify;">
<span style="text-decoration: underline;"><span style="font-family: Arial, Helvetica, sans-serif;"><strong></strong></span></span></div>
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<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Zero Coupon Debentures:</strong></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Does not have a specified interest rate, thereby to compensate, they are issued at a substantial discount. Interest: Difference in face value and issue price. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong></strong></span></div>
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<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Specific Coupon rate Debentures: </strong></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Debentures are normally issued with an interest rate which is nothing but the coupon rate. It can be fixed or floating. Floating is associated with the bank rates. </span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="text-decoration: underline;"><span style="font-family: Arial, Helvetica, sans-serif;"><strong><span style="text-decoration: underline;"><span style="font-family: Arial, Helvetica, sans-serif;"><strong>From the point of view of </strong></span></span>Convertibility:</strong></span></span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Convertible Debentures (Fully/ Partly convertible): </strong></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Debentures which can be converted to either equity shares or preference shares by the company or debenture holders at a specified rate after a certain period. A company can also issue Partly Convertible Debentures whereby only a part of the amount can be converted to equity/preference shares.</span></div>
<div style="text-align: justify;">
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<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Non Convertible Debentures (NCDs): </strong></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">These can’t be converted into equity/preference shares.</span><br />
<br />
<span style="font-family: Arial;"><span style="color: blue;">Source : </span><a href="http://www.financenmoney.in/"><span style="color: blue;">www.Financenmoney.in</span></a></span></div>
</div>
Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-15371627073038230052012-07-10T01:21:00.004-07:002012-07-10T02:21:09.536-07:00Types of Mortgages<div dir="ltr" style="text-align: left;" trbidi="on">
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<div style="text-align: justify;">
<strong><span style="font-family: Arial, Helvetica, sans-serif;">DEFINITION AND NATURE OF MORTGAGE:</span></strong></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">According to Section 58 of the Transfer of Property Act, 1882, a mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt or the performance of an agreement which may give rise to pecuniary liability.</span><br />
<br />
<span style="font-family: Arial, Helvetica, sans-serif;">The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest the payment of which is secured for the time being are called the mortgage money and the instrument by which the transfer is effected is called the mortgage deed.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>Essentials of a Mortgage:</b></span></div>
<ol style="text-align: left;">
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><i><strong>Transfer of Interest:</strong></i> </span><span style="font-family: Arial, Helvetica, sans-serif;">The first thing to note is that a mortgage is a transfer of interest in the specific immovable property. The mortgagor as an owner of the property possesses all the interests in it, and when he mortgages the property to secure a loan, he only parts with a part of the interest in that property in favour of the mortgagee. After mortgage, the interest of the mortgagor is reduced by the interest which has been transferred to the mortgagee. His ownership has become less for the time being by the interest which he has parted with in favour of the mortgagee. If the mortgagor transfers this property, the transferee gets it subject to the right of the mortgagee to recover from it what is due to him i.e., the principal plus interest.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><i><strong>Specific Immovable Property:</strong></i> The second point is that the property must be specifically mentioned in the mortgage deed. Where, for instance, the mortgagor stated “all of my property” in the mortgage deed, it was held by the Court that this was not a mortgage. The reason why the immovable property must be distinctly and specifically mentioned in the mortgage deed is that, in case the mortgagor fails to repay the loan the Court is in a position to grant a decree for the sale of any particular property on a suit by the mortgagee.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><i><strong>To Secure the Payment of a Loan:</strong></i> Another characteristic of a mortgage is that the transaction is for the purpose of securing the payment of a loan or the performance of an obligation which may give rise to pecuniary liability. It may be for the purpose of obtaining a loan, or if a loan has already been granted to secure the repayment of such loan. There is thus a debt and the relationship between the mortgagor and the mortgagee is that of debtor and creditor. When A borrows 100 bags of paddy from B on a mortgage and agrees to return an equal quantity of paddy and a further quantity by way of interest, it is a mortgage transaction for the performance of an obligation.</span></div>
</li>
</ol>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Where, however, a person borrows money and agrees with the creditor that till the debt is repaid he will not alienate his property, the transaction does not amount to a mortgage. Here the person merely says that he will not transfer his property till he has repaid the debt; he does not transfer any interest in the property to the creditor. In a sale, as distinguished from a mortgage, all the interests or rights or ownership are transferred to the purchaser. In a mortgage, as stated earlier, only part of the interest is transferred to the mortgagee, some of them remains vested in the mortgagor.</span></div>
<div style="text-align: justify;">
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<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">To sum up, it may be stated that there are three outstanding characteristics of a mortgage:</span></div>
<ol style="text-align: left;">
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The mortgagee’s interest in the property mortgaged terminates upon the performance of the obligation secured by the mortgage.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The mortgagee has a right of foreclosure upon the mortgagor’s failure to perform.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The mortgagor has a right to redeem or regain the property on repayment of the debt or performance of the obligation.</span></div>
</li>
</ol>
<div style="text-align: justify;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">Difference between Mortgage and Charge:</span></b></div>
<ul style="text-align: left;">
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A mortgage is created by the act of the parties whereas a charge may be created either through the act of parties or by operation of law.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A charge created by operation of law does not require the registration as prescribed for mortgage under the Transfer of Property Act. But a charge created by act of parties requires registration.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A mortgage is for a fixed term whereas the charge may be in perpetuity.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A simple mortgage carries personal liability unless excluded by express contract. But in case of charge, no personal liability is created. But where a charge is the result of a contract, there may be a personal remedy.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A charge only gives a right to receive payment out of a particular property, a mortgage is a transfer of an interest in specific immovable property.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A mortgage is a transfer of an interest in a specific immovable property, but there is no such transfer of interest in the case of a charge. Charge does not operate as transfer of an interest in the property and a transferee of the property gets the property free from the charge provided he purchases it for value without notice of the charge.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A mortgage is good against subsequent transferees, but a charge is good against subsequent transferees with notice.</span></div>
</li>
</ul>
<div style="text-align: justify;">
<span style="color: blue; font-family: Arial;">Source:www.lawyersclubindia.com</span></div>
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<span style="font-family: Arial;">-----------------------------------------------</span><br />
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<strong><span style="font-family: Arial, Helvetica, sans-serif;">Types of Mortgage:</span></strong></div>
<div class="pagestext" style="text-align: justify;">
<ol>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Simple Mortgage</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Mortgage by Conditional Sale</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Usufructuary Mortgage</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">English Mortgage</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Mortgage by deposit of title Deed</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Anomalous mortgage</span></li>
</ol>
</div>
</div>
<div style="text-align: justify;">
<span style="font-family: Arial;"><strong>1. Simple Mortgage</strong></span><br />
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</div>
</div>
<div style="text-align: justify;">
A simple mortgage does not involve giving the possession of the mortgagor's property to the mortgagee. It is under mutual agreement that in case of non-payment by the mortgagee to the mortgagor within the specified time, the mortgagee can cause the mortgaged property to be sold in accordance with law and have the sale proceeds adjusted towards the payment of the mortgage money.</div>
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<br /></div>
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<strong>2. Mortgage by Conditional Sale</strong></div>
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This type of mortgage entails the apparent sale of property by the mortgagor to the mortgagee on a conditional basis, that on default by mortgagor, the sale shall become absolute and complete. If the mortgagor repays his loan, the sale shall become null and void. </div>
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<br /></div>
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<strong>3. Usufructuary Mortgage</strong></div>
<div style="text-align: justify;">
This type of mortgage, by an express or implied term gives possession to the lender and gives him rights to accrue the rents or income coming from that property as repayment for interest and mortgage money till the time repayment is complete. There is no time limit for payment of the mortgage money. </div>
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<br /></div>
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<strong>4. English Mortgage</strong> </div>
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The mortgagor transfers the mortgaged property to the mortgagee in entirety. However there is a condition that on complete repayment of the repayment money, he will re-transfer the property back to himself. </div>
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<br /></div>
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<strong>5. Reverse Mortgage </strong></div>
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</div>
<div style="text-align: justify;">
Reverse mortgage involves lending money to senior citizens against mortgage of their property (house) and there is no need of repaying the same. The loan is awarded as a lump sum amount or as monthly installments. In the event of death of the mortgagor, the property goes into the possession of the mortgagee. </div>
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<br /></div>
<div style="text-align: justify;">
<strong>6. Anomalous Mortgage</strong></div>
<div style="text-align: justify;">
A mortgage that does not fall under the purview of any of the mortgage types is called an anomalous mortgage. </div>
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<br /></div>
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<strong>Conditions attached with mortgage</strong></div>
<ol type="1">
<li><div style="text-align: justify;">
While mortgaging property, only legal rights are transferred to the mortgagee but not the possession.</div>
</li>
<li><div style="text-align: justify;">
An instrument of mortgage deed is mandatory.</div>
</li>
<li><div style="text-align: justify;">
On sale of a mortgaged property, the mortgage flows along with the property.</div>
</li>
</ol>
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<span style="color: blue;">Source :www.indianrealtylaw.com </span></div>
</div>
Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-44938547038054435172012-07-09T22:24:00.002-07:002012-07-09T22:29:40.213-07:00Capital Reserve, Reserve Capital,Revenue Reserve<div dir="ltr" style="text-align: left;" trbidi="on">
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Capital Reserve Vs. Reserve Capital :</h3>
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<span style="font-family: Arial, Helvetica, sans-serif;">1. Capital reserve is created out of capital profits (profit due to reevaluation of assets) and therefore it is not available for distribution as dividend to the shareholders, while <strong>reserve capital</strong> is that part of authorized capital of a company which is not called up by the company. Also there is no special resolution required as in the case of reserve capital, for creating capital reserve</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">2. Reserve capital can be used by the company only in case of liquidation of the company while capital reserve can be used by company at any time for purchasing long term assets by the company.</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">3. Capital reserve is shown on the liabilities side of the balance sheet while Reserve capital is not disclosed in the balance sheet of the company.</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">4. Capital reserve can be used by the company to write off capital losses which arises due to selling of assets at lower prices than the book value of that asset while Reserve capital cannot be used for that purpose.</span></div>
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<br /></div>
<h3 style="text-align: justify;">
Capital Reserve Vs. Revenue Reserve :</h3>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="font-style: italic; font-weight: bold;">Capital Reserve</span><br /><br />The reserve which is created out of the capital profit is known as capital reserve. Capital reserve is created out of the profit of some specific transactions of capital nature. It is not available for the distribution to shareholders as dividend. It is used to meet capital loss. Capital reserve is shown on the liabilities side of the balance sheet. Sometimes, it can be used to issue fully-paid bonus shares.<br /><br /><span style="font-weight: bold;">Items of capital profit out of which capital reserve is created:</span><br />* Profit on revaluation of assets and liabilities.<br />* Profit on sale of assets<br />* Profit on sale of shares and debentures<br />* Profit on forfeiture of shares<br />* profit on redemption of debentures<br />* profit on purchasing running business<br /><br /><span style="font-style: italic; font-weight: bold;">Revenue Reserve</span><br /><br />Revenue reserve is created out of the revenue profit earned in the normal course of the business. It refers to the undistributed revenue profit. It can be distributed as dividend to the shareholders. Revenue reserve helps to strengthen the financial position of the company and also helps to declare uniform rate of dividend.<br /><br /><span style="font-style: italic; font-weight: bold;">Items relating to revenue reserve</span><br />* General reserve<br />* Dividend equalization fund<br />* Sinking fund<br />* Research and development fund</span></div>
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</div>
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Anonymousnoreply@blogger.com1tag:blogger.com,1999:blog-8102870735351064242.post-74647848795560719112012-07-09T20:38:00.001-07:002012-10-27T08:14:10.336-07:00Procedure of Issue of Shares,Forfeiture of Shares<div dir="ltr" style="text-align: left;" trbidi="on">
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<strong><span style="font-family: 'Trebuchet MS', sans-serif;">Procedure of issue of shares:</span></strong></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;">When company has been registered, the following procedure is adopted by the company to collect money from the public by issuing of shares:</span></div>
<span style="font-family: 'Trebuchet MS', sans-serif;"></span><br />
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<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
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<strong><div style="text-align: justify;">
<strong>Step-1</strong></div>
</strong><strong><div style="text-align: justify;">
<strong>Issue of prospectus:</strong></div>
</strong></span><br />
<br />
<div style="text-align: justify;">
<span style="font-family: 'Trebuchet MS', sans-serif;">When a Public company intends to raise capital by issuing its shares to the public, it invites the public to make an offer to buy its shares through a document called ‘Prospectus’. According to Section 60 (1), a copy of prospectus is required to be delivered to the Registrar for registration on or before the date of publication thereof. </span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: 'Trebuchet MS', sans-serif;">It contains the brief information about the company, its past record and of the project for which company is issuing share. </span><span style="font-family: 'Trebuchet MS', sans-serif;">It also includes the opening date and the closing date of the issue, amount payable with application, at the time of allotment and on calls, name of the bank in which the application money will be deposited, minimum number of shares for which application will be accepted, etc.</span></div>
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<strong><div style="text-align: justify;">
<strong>Step-2</strong></div>
</strong><strong><div style="text-align: justify;">
<strong>To receive application:</strong></div>
</strong></span><br />
<br />
<div style="text-align: justify;">
<span style="font-family: 'Trebuchet MS', sans-serif;">After reading the prospectus if the public is satisfied then they can apply to the company for purchase of its shares on a printed prescribed form. Each application form along with application money must be deposited by the public in a schedule bank and get a receipt for the same.</span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: 'Trebuchet MS', sans-serif;">The company cannot withdraw this money from the bank till the procedure of allotment has been completed (in case of first allotment, this amount cannot be withdrawn until the certificate to commence business is obtained and the amount of minimum subscription has been received). The amount payable on application for share shall not be less than 5% of the nominal amount of share.</span></div>
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<strong><div style="text-align: justify;">
<strong>Step-3</strong></div>
</strong><strong><div style="text-align: justify;">
<strong>Allotments of shares:</strong></div>
</strong></span><br />
<br />
<div style="text-align: justify;">
<span style="font-family: 'Trebuchet MS', sans-serif;">Allotments of shares means acceptance by the company of the offer made by the applicants to take up the shares applied for. The information of allotment is given to the shareholders by a letter known as ‘Allotment Letter’, informing the amount to be called at the time of allotment and the date fixed for payment of such money. It is on allotment that share come into existence. </span></div>
<div style="text-align: justify;">
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: 'Trebuchet MS', sans-serif;">Thus, the application money on the share after allotment becomes a part of share capital. Decision to allot the share is taken by the Board of Directors in consultation with the stock exchange. After the closure of the subscription list, the bank sends all applications to the company. On receipt of applications, each application is carefully scrutinised to ascertain that the application form is properly filled up and signed and the money is deposited with the bank.</span></div>
<span style="font-family: 'Trebuchet MS', sans-serif;"></span><br />
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<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
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<strong><div style="text-align: justify;">
<strong>Step-4</strong></div>
</strong><strong><div style="text-align: justify;">
<strong>To make calls on shares:</strong></div>
</strong></span><br />
<br />
<div style="text-align: justify;">
<span style="font-family: 'Trebuchet MS', sans-serif;">The remaining amount left after application and allotment money due from shareholders may be demanded in one or more parts which are termed as ‘First Call’ and ‘Second Call’ and so on. A word ‘Final’ word is added to the last call. The amount of call must not exceed 25% of the nominal value of the shares and at least 1 month have elapsed since the date which was fixed for the payment of the last preceding call, for which at least 14 days notice specifying the time and place must be given.</span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<span style="font-family: 'Trebuchet MS', sans-serif;">
<strong><div style="text-align: justify;">
<strong>Modes of issue of shares:</strong></div>
</strong><div style="text-align: justify;">
A company can issue shares in two ways:</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
1. For cash.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
2. For consideration other than cash.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Issue of shares for cash: When the shares are issued by the company in consideration for cash such issue of shares is known as issue of share for cash. In such a case shares can be issued at par or at a premium or at a discount. Such issue price may be payable either in lump sum along with application or in instalments at different stages (e.g. partly on application, partly on allotment, partly on call).</div>
<div style="text-align: justify;">
<br /></div>
<strong><div style="text-align: justify;">
<strong>Issue of shares at par:</strong></div>
</strong></span><br />
<br />
<div style="text-align: justify;">
<span style="font-family: 'Trebuchet MS', sans-serif;">Shares are said to be issued at par when they are issued at a price equal to the face value. For example, if a share of Rs. 10 is issued at Rs. 10, it is said that the share has been issued at par. Issue of shares at premium: When shares are issued at an amount more than the face value of share, they are said to be issued at premium. For example, if a share of Rs. 10 is issued at Rs. 15; such a condition of issue is known as issue of shares at premium. </span></div>
<div style="text-align: justify;">
<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: 'Trebuchet MS', sans-serif;">The difference between the issue price and the face value [i.e. Rs. 5 (Rs.15 – Rs.10)] of the shares is called premium. It is a capital profit for the company and will show credit balance; hence it will be shown in the liability side of the Balance Sheet under the heading ‘Reserves and Surplus’ in a separate account called ‘Security Premium Account’. Shares of those companies can be issued at premium which offer attractive rate of dividend on their existing shares, having a good profit track for last few years and whose shares are in demand. The amount of premium depends upon the profitability and demand of shares of such company.</span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
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<div style="font-weight: bold; text-align: justify;">
<strong>Note:</strong> </div>
<div style="text-align: justify;">
The Company may collect the amount of security premium in lump sum or in instalments. Premium on shares may be collected by the company either with application money or with the allotment money or even with one of the calls. In absence of any information, the amount of the premium is to be recorded with allotment.</div>
<div style="text-align: justify;">
<br /></div>
<strong><div style="text-align: justify;">
<strong>Issue of shares at discount:</strong></div>
</strong></span><br />
<br />
<div style="text-align: justify;">
<span style="font-family: 'Trebuchet MS', sans-serif;">Shares are said to be issued at a discount when they are issued at a price lower than the face value. For example if a share of Rs. 10 is issued at Rs. 9, it is said that the share has been issued at discount. The excess of the face value over the issue price [i.e. Re.1 (Rs. 10 – Rs. 9)] is called as the amount of discount. Share discount account showing a debit balance denotes a loss to the company which is in the nature of capital loss. Therefore, it is desirable, but not compulsory, to write it off against any Capital Profit available or Profit and Loss Account as soon as possible, and the unwritten off part of it is shown in the asset side of the Balance Sheet under the heading of ‘Miscellaneous Expenditure’ in a separate account called ‘Discount on issue of Shares Account’.</span></div>
<span style="font-family: 'Trebuchet MS', sans-serif;"></span><br />
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<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<span style="font-family: 'Trebuchet MS', sans-serif;">
<div style="text-align: justify;">
Conditions for issue of shares at discount: For issue of shares a discount the company has to satisfy the following conditions given in section 79 of the Companies Act 1956:</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
(i) At least one year must have elapsed since the company became entitled to commence business. It means that a new company cannot issue shares at a discount at the very beginning.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
(ii) The company has already issued such types of shares.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
(iii) An ordinary resolution to issue the shares at a discount has been passed by the company in the General Meeting of shareholders and sanction of the Company Law Tribunal has been obtained.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
(iv) The resolution must specify the maximum rate of discount at which the shares are to be issued but the rate of discount must not exceed 10% of the face value of the shares. For more than this limit, sanction of the Company Law Tribunal is necessary.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
(v) The issue must be made within two months from the date of receiving the sanction of the Company Law Tribunal or within such extended time as the Company Law Tribunal may allow.</div>
<div style="text-align: justify;">
<br /></div>
<strong><div style="text-align: justify;">
<strong>Forfeiture of shares:</strong></div>
</strong><div style="text-align: justify;">
When any company allots share to the applicants, it is done on the basis of a legal contract between the company and the applicant, which makes it binding upon the shareholders to pay the amount of allotment and calls whenever they are due. Now if any shareholder fails to pay the allotment and or call money due to him, the shareholder violates the contract and the company is entitled to take its share back, which is known as forfeiture of shares. The company can forfeit such shares if authorised by the Articles of Association. Forfeiture of share can be done according to the rules laid sown in the Articles and if no rules are given in Articles, the provisions of Table A, regarding forfeiture will apply. Forfeiture of shares means cancellation of allotment to defaulting shareholders and to treat the amount already received on such shares is not returnable to him – it is forfeited.</div>
<div style="text-align: justify;">
<br /></div>
<strong><div style="text-align: justify;">
<strong>Procedure for forfeited shares:</strong></div>
</strong><div style="text-align: justify;">
The usual procedure is that the defaulting shareholder must be given a minimum 14 days notice requiring him to pay the amount due on his shares along with interest on it stating that if he fails to pay the amount and the interest on it, the shares will be forfeited. Inspite of this notice, the shareholder does not pay the unpaid amount. The directors after passing a resolution will forfeit the shares and information will be given to the defaulting shareholder about the forfeiture his shares.</div>
<div style="text-align: justify;">
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<strong><div style="text-align: justify;">
<strong>Effect of forfeiture of shares:</strong></div>
</strong></span><br />
<br />
<div style="text-align: justify;">
<span style="font-family: 'Trebuchet MS', sans-serif;">1. Termination of membership: The membership of the defaulting will be terminated and they lose all the rights and interest on those shares i.e. ceases to be the member / shareholder / owner of the company and his name will be removed from the Register of Members</span></div>
<span style="font-family: 'Trebuchet MS', sans-serif;"></span><br />
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<span style="font-family: 'Trebuchet MS', sans-serif;"><br /></span></div>
<span style="font-family: 'Trebuchet MS', sans-serif;">
<div style="text-align: justify;">
2. Seizure of money paid: The amount already paid on the forfeited shares by the defaulting shareholders will be seized by the company and in no case will be refunded back to the shareholder.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
3. Non payment of dividend: When shares are forfeited the shareholder remains no longer the member of the company therefore he looses the right to receive future dividend.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
4. Reduction of share capital: Forfeiture of shares result in the reduction of share capital to the extent of amount called up on such shares.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<div style="font-weight: bold;">
<strong>Surrender of shares:</strong></div>
When a shareholder feels that he cannot pay further calls; he may himself surrender the shares to the company. These shares are then cancelled. Surrender of shares is a voluntary return of shares for the purposes of cancellation. The directors can accept the surrender of shares only when the Articles of Association authorise them to do so. Surrender is lawful only in two cases viz.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
(a) where it is done as a short cut to forfeiture to avoid the formalities for a valid forfeiture and</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
(b) where shares are surrendered in exchange for new shares of the same nominal value. A surrender will be void if it amounts to purchase of the shares by the company or if it is accepted for the purpose of relieving a member from his liabilities. Entries are passed just like forfeiture of shares.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Thus, surrender of shares is at the instance of shareholder whereas forfeiture of shares at the instance of company.</div>
<div style="text-align: justify;">
<br /></div>
<strong><div style="text-align: justify;">
<strong>Re-issue of Forfeited of shares:</strong></div>
</strong><div style="text-align: justify;">
Shares forfeited becomes the property of the company and the directors of a company have an authority to re-issue the shares once forfeited by them in accordance with the provisions contained in Articles of Association. Table ‘A’ provides that “A forfeited shares may be sold or otherwise disposed off on such terms and in such manner as the Board thinks fit”. They can re-issue the forfeited shares at par, at premium or at discount. However, if the shares are re-issued at discount, the amount of the discount does not exceed the amount paid on such shares by the original shareholder but in case of shares originally issued at a discount, the maximum permissible discount will be amount paid on such shares by the original shareholder plus the amount of original discount.</div>
<div style="text-align: justify;">
<br /></div>
<strong><div style="text-align: justify;">
<strong>Over subscription of issue:</strong></div>
</strong><div style="text-align: justify;">
When the application received from the public are more than the shares issued by the company, this situation is called as over subscription of issue. The Board of Directors cannot allot shares more than that offered to the public, in such a condition the Directors of the company make the allotment of shares on the basis of reasonable criteria. Any allotment to be made by the company in case of over subscription should be according to the scheme, which is finalized with the consultation of Security and Exchange Board of India (S.E.B.I.) The journal entry for application money will be passed for all the shares applied for, but while transferring the application money to share capital account, only the application money on shares issued will be considered.</div>
<div style="text-align: justify;">
<br /></div>
<strong><div style="text-align: justify;">
<strong>Under subscription of issue:</strong></div>
</strong><div style="text-align: justify;">
Shares are said to be under-subscribed when the number of shares applied for is less than the number of shares offered, but at least minimum subscription (According to the guidelines issued by S.E.B.I. minimum subscription means ‘If the company does not receive a minimum subscription of 90% of the issued amount within 60 days from the date of closure of the issue, the company shall forthwith refund the entire subscription amount’) is received. For example, in case has offered 5,000 shares to public but the public applied for 4,500 shares only, it is called a case of under-subscription. Journal entries are passed on the basis of shares applied for.</div>
<div style="text-align: justify;">
<br /></div>
<strong><div style="text-align: justify;">
<strong>Private placement of shares:</strong></div>
</strong><div style="text-align: justify;">
According to Section 81 (1A) of the Companies Act, 1956 private placement of shares implies issue and allotment of shares to a selected group of persons such U.T.I., L.I.C. etc. in other words; an issue which is not a public issue but offered to a select group of persons is called Private Placement of shares.</div>
<div style="text-align: justify;">
<br /></div>
<strong><div style="text-align: justify;">
<strong>Preferential allotment:</strong></div>
</strong><div style="text-align: justify;">
A preferential allotment is one that is made at a pre-determined price to the preidentified people who wish to take a strategic stake in the company such as promoters, venture capitalists, financial institutions, buyers of companies products ore its suppliers. In other such a case, the allottees will not sell their securities in the open market for a minimum period of three years from the date of allotment. This period is known as the lock-in-period. The preferential allotment can take place only if three-fourths of the shareholders agree to the issue on preferential basis. S.E.B.I. has prescribed that the minimum price of such an issue has to be an average of highs and lows of the 26 week preceding the date on which the board resolves to make the preferential allotment.</div>
<div style="text-align: justify;">
<br /></div>
<strong><div style="text-align: justify;">
<strong>Employee stock option plan:</strong></div>
</strong><div style="text-align: justify;">
In order to retain high caliber employees or to give them a sense of belonging, companies may offer their equity shares to be purchased at their will. Such scheme is called Employee stock option plan (ESOP). Following are the characteristics of this scheme:</div>
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1) ESOP implies the right, but not an obligation.</div>
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2) The employee has a right to exercise the option of purchase of shares within the vesting period, i.e., the time period during which the scheme remains in operation.</div>
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3) Any share issued under the scheme of ESOP shall be locked-in for a minimum period of one year from the date of allotment.</div>
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<strong>Buy-back of shares:</strong></div>
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The term buy-back of share implies the act of purchasing its own shares by a company either from free reserves, securities premium or proceeds of any shares or securities. According to Section 77A of the Companies Act 1956, a company can buy its own shares either from the:</div>
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a) Existing equity shareholders on a proportionate basis.</div>
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b) Open market</div>
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c) Odd lot shareholders</div>
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d) Employees of the company pursuant to a scheme of stock option or sweat equity.</div>
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<strong>Right shares:</strong></div>
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Under Section 81 of the Companies Act, the existing shareholders have a right to subscribe, in their existing proportion, to the fresh issue of capital or to reject the offer, or sell their rights. The existing shareholders can authorize the company by passing a special resolution to offer such shares to the public.</div>
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Source : lexvidhi.com</div>
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Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-1995636284821450462012-07-08T23:21:00.001-07:002012-07-08T23:34:16.273-07:00Accounting Equation<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial, Helvetica, sans-serif;"><b>The Accounting Equation:</b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The ability to read financial statements requires an understanding of the items they include and the standard categories used to classify these items. The accounting equation identifies the relationship between the elements of accounting.</span></div>
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<table border="0" cellpadding="0" cellspacing="0" style="color: #333333; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: center;"><tbody style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
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<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" valign="top"><td style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;"><img align="absmiddle" alt="" border="0" src="http://media.wiley.com/Lux/09/20809.nce002.jpg" style="border-bottom-width: 0px; border-color: initial; border-image: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /></span></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;"><br style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" /></span></td></tr>
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<strong style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Assets</strong><span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; text-align: justify;">. An </span><strong style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">asset</strong><span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; text-align: justify;"> is something of value the company owns. Assets can be tangible or intangible. </span><strong style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Tangible assets</strong><span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; text-align: justify;"> are generally divided into three major categories: current assets (including cash, marketable securities, accounts receivable, inventory, and prepaid expenses); property, plant, and equipment; and long-term investments. </span><strong style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Intangible assets</strong><span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; text-align: justify;"> lack physical substance, but they may, nevertheless, provide substantial value to the company that owns them. Examples of intangible assets include patents, copyrights, trademarks, and franchise licenses. A brief description of some tangible assets follows.</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Current assets</strong> typically include cash and assets the company reasonably expects to use, sell, or collect within one year. Current assets appear on the balance sheet (and in the numbered list below) in order, from most liquid to least liquid. <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Liquid assets</strong> are readily convertible into cash or other assets, and they are generally accepted as payment for liabilities.</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Cash</strong> includes cash on hand (petty cash), bank balances (checking, savings, or money-market accounts), and cash equivalents. <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Cash equivalents</strong> are highly liquid investments, such as certificates of deposit and U.S. treasury bills, with maturities of ninety days or less at the time of purchase.</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Marketable securities</strong> include short-term investments in stocks, bonds (debt), certificates of deposit, or other securities. These items are classified as marketable securities—rather than long-term investments—only if the company has both the ability and the desire to sell them within one year.</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Accounts receivable</strong> are amounts owed to the company by customers who have received products or services but have not yet paid for them.</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Inventory</strong> is the cost to acquire or manufacture merchandise for sale to customers. Although service enterprises that never provide customers with merchandise do not use this category for current assets, inventory usually represents a significant portion of assets in merchandising and manufacturing companies.</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Prepaid expenses</strong> are amounts paid by the company to purchase items or services that represent future costs of doing business. Examples include office supplies, insurance premiums, and advance payments for rent. These assets become expenses as they expire or get used up.</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Property, plant, and equipment</strong> is the title given to long-lived assets the business uses to help generate revenue. This category is sometimes called fixed assets. Examples include land, natural resources such as timber or mineral reserves, buildings, production equipment, vehicles, and office furniture. With the exception of land, the cost of an asset in this category is allocated to expense over the asset's estimated useful life.</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Long-term investments</strong> include purchases of debt or stock issued by other companies and investments with other companies in joint ventures. Long-term investments differ from marketable securities because the company intends to hold long-term investments for more than one year or the securities are not marketable.</span></div>
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<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Liabilities. Liabilities</strong> are the company's existing debts and obligations owed to third parties. Examples include amounts owed to suppliers for goods or services received (accounts payable), to employees for work performed (wages payable), and to banks for principal and interest on loans (notes payable and interest payable). Liabilities are generally classified as short-term (current) if they are due in one year or less. Long-term liabilities are not due for at least one year.</span></div>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Owner's equity. Owner's equity</strong> represents the amount owed to the owner or owners by the company. Algebraically, this amount is calculated by subtracting liabilities from each side of the accounting equation. Owner's equity also represents the <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">net assets</strong> of the company.</span></div>
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<span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; text-align: justify;">In a sole proprietorship or partnership, owner's equity equals the total net investment in the business plus the net income or loss generated during the business's life. </span><strong style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Net investment</strong><span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; text-align: justify;"> equals the sum of all investment in the business by the owner or owners minus withdrawals made by the owner or owners. The owner's investment is recorded in the owner's capital account, and any withdrawals are recorded in a separate owner's drawing account. For example, if a business owner contributes $10,000 to start a company but later withdraws $1,000 for personal expenses, the owner's net investment equals $9,000. </span><strong style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Net income</strong><span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; text-align: justify;"> or </span><strong style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">net loss</strong><span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; text-align: justify;">equals the company's revenues less its expenses. </span><strong style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Revenues</strong><span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; text-align: justify;"> are inflows of money or other assets received from customers in exchange for goods or services.</span><strong style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Expenses</strong><span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; text-align: justify;"> are the costs incurred to generate those revenues.</span></div>
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<div style="text-align: justify;">
<span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif;">Capital investments and revenues increase owner's equity, while expenses and owner withdrawals (drawings) decrease owner's equity. In a partnership, there are separate capital and drawing accounts for each partner.</span></div>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Stockholders' equity</strong>. In a corporation, ownership is represented by shares of stock, so the owners' equity. is called <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">stockholders' equity</strong> or <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">shareholders' equity</strong>. Corporations use several types of accounts to record stockholders' equity activities: preferred stock, common stock, paid-in capital (these are often referred to as contributed capital), and retained earnings. <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Contributed capital</strong> accounts record the total amount invested by stockholders in the corporation. If a corporation issues more than one class of stock, separate accounts are maintained for each class. <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Retained earnings</strong> equal net income or loss over the life of the business less any amounts given back to stockholders in the form of dividends. Dividends affect stockholders' equity in the same way that owner withdrawals affect owner's equity in sole proprietorships and partnerships.</span></div>
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<span style="color: blue; font-family: Arial, Helvetica, sans-serif; text-align: justify;">Source:www.cliffsnotes.com</span>
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</div>Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-29413082794702722012-07-08T22:19:00.001-07:002012-07-08T23:39:53.759-07:00Introduction to Accounting ,Financial Statements,Financial Reporting Objectives,Accounting Principles,Internal Control System<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: #333333; font-family: Arial, Helvetica, sans-serif;">Introduction to Accounting:</span></h2>
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<span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif;">Accounting is the language of business. It is the system of recording, summarizing, and analyzing an economic entity's financial transactions. Effectively communicating this information is key to the success of every business. Those who rely on financial information include internal users, such as a company's managers and employees, and external users, such as banks, investors, governmental agencies, financial analysts, and labor unions. These users depend upon data supplied by accountants to answer the following types of questions:</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Is the company profitable?</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Is there enough cash to meet payroll needs?</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">How much debt does the company have?</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">How does the company's net income compare to its budget?</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">What is the balance owed by customers?</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Has the company consistently paid cash dividends?</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">How much income does each division generate?</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Should the company invest money to expand?</span></div>
</li>
</ul>
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<span style="font-family: Arial, Helvetica, sans-serif;">Accountants must present an organization's financial information in clear, concise reports that help make questions like these easy to answer. The most common accounting reports are called financial statements.</span></div>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<h2>
<span style="font-family: Arial, Helvetica, sans-serif;">Understanding F</span><span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">inancial Statements:</span></h2>
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">The financial statements shown on the next several pages are for a </span><strong style="background-color: white; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">sole proprietorship,</strong><span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"> which is a business owned by an individual. Corporate financial statements are slightly different. The four basic financial statements are the income statement, statement of owner's equity, balance sheet, and statement of cash flows. The income statement, statement of owner's equity, and statement of cash flows report activity for a specific period of time, usually a month, quarter, or year. The balance sheet reports balances of certain elements at a specific time. All four statements have a three-line heading in the following format:</span></div>
<div style="color: #333333;">
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<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
</div>
<h3 style="text-align: left;">
<strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">Income statement:</span></strong></h3>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">income statement</strong>, which is sometimes called the statement of earnings or statement of operations, is prepared first. It lists revenues and expenses and calculates the company's net income or net loss for a period of time. <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Net income</strong> means total revenues are greater than total expenses.<strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Net loss</strong> means total expenses are greater than total revenues. The specific items that appear in financial statements are explained later.</span></div>
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</div>
<table border="0" cellpadding="0" cellspacing="0" style="color: #333333; font-size: 14px; line-height: 21px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: center;"><tbody style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">The Greener Landscape Group Income Statement For the Month Ended April 30, 20X2</span></strong></strong><br />
<table border="1" bordercolor="#000000" cellpadding="4" cellspacing="0" frame="border" rules="none" style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" summary="
The Greener Landscape Group Income Statement For the Month Ended April 30, 20X2
"><tbody style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>Revenues</b></span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Lawn Cutting Revenue</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">$845</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>Expenses</b></span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Wages Expense</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">$280</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Depreciation Expense</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">235</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Insurance Expense</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">100</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Interest Expense</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">79</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Advertising Expense</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">35</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Gas Expense</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">30</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Supplies Expense</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">25</span></u></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Total Expenses</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">784</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">Net Income</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">$ 61</span></u></div>
</td></tr>
</tbody></table>
</td></tr>
</tbody></table>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
</div>
<h3 style="text-align: left;">
<strong style="background-color: white; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">Statement of owner's equity:</span></strong></h3>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The statement of owner's equity is prepared after the income statement. It shows the beginning and ending owner's equity balances and the items affecting owner's equity during the period. These items include investments, the net income or loss from the income statement, and withdrawals. Because the specific revenue and expense categories that determine net income or loss appear on the income statement, the statement of owner's equity shows only the total net income or loss. Balances enclosed by parentheses are subtracted from unenclosed balances.</span></div>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
</div>
<table border="0" cellpadding="0" cellspacing="0" style="color: #333333; font-size: 14px; line-height: 21px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: center;"><tbody style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">The Greener Landscape Group Statement of Owner's Equity For the Month Ended April 30, 20X2</span></strong></strong><br />
<table border="1" bordercolor="#000000" cellpadding="4" cellspacing="0" frame="border" rules="none" style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" summary="
The Greener Landscape Group Statement of Owner's Equity For the Month Ended April 30, 20X2
"><tbody style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">J. Green, Capital, April 1</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">$ 0</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>Additions</b></span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Investments</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">$15,000</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Net Income</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">61</span></u></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">15,061</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>Withdrawals</b></span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">(50)</span></u></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">J. Green, Capital, April 30</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">$ 15,011</span></u></div>
</td></tr>
</tbody></table>
</td></tr>
</tbody></table>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
</div>
<h3 style="text-align: left;">
<strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">Balance sheet:</span></strong></h3>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The balance sheet shows the balance, at a particular time, of each asset, each liability, and owner's equity. It proves that the <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">accounting equation</strong>(Assets = Liabilities + Owner's Equity) is in balance. The ending balance on the statement of owner's equity is used to report owner's equity on the balance sheet.</span></div>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
</div>
<table border="0" cellpadding="0" cellspacing="0" style="color: #333333; font-size: 14px; line-height: 21px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: center;"><tbody style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">The Greener Landscape Group Balance Sheet April 30, 20X2</span></strong></strong><br />
<table border="1" bordercolor="#000000" cellpadding="4" cellspacing="0" frame="border" rules="none" style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" summary="
The Greener Landscape Group Balance Sheet April 30, 20X2
"><tbody style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>ASSETS</b></span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>Current Assets</b></span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Cash</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">$ 6,355</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Accounts Receivable</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">200</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Supplies</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">25</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Prepaid Insurance</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">1,100</span></u></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Total Current Assets</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">7,680</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>Property, Plant, and Equipment</b></span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Equipment</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">$18,000</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Less: Accumulated Depreciation</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">(235)</span></u></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">17,765</span></u></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Total Assets</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">$25,445</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>LIABILITIES AND OWNER'S EQUITY</b></span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>Current Liabilities</b></span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Accounts Payable</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">$ 50</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Wages Payable</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">80</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Interest Payable</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">79</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Unearned Revenue</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">225</span></u></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Total Current Liabilities</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">434</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>Long-Term Liabilities</b></span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Notes Payable</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">10,000</span></u></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Total Liabilities</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">10,434</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>Owner's Equity</b></span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> J. Green, Capital</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">15,011</span></u></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Total Liabilities and Owner's Equity</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">$25,445</span></u></div>
</td></tr>
</tbody></table>
</td></tr>
</tbody></table>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
</div>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<strong style="background-color: white; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></strong></div>
<h3 style="text-align: left;">
<strong style="background-color: white; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">Statement of cash flows:</span></strong></h3>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="background-color: white;"><span style="font-family: Arial, Helvetica, sans-serif;">The statement of cash flows tracks the movement of cash during a specific accounting period. It assigns all cash exchanges to one of three categories—operating, investing, or financing—to calculate the net change in cash and then reconciles the accounting period's beginning and ending cash balances. As its name implies, the statement of cash flows includes items that affect cash. Although not part of the statement's main body, significant non-cash items must also be disclosed.</span></span></div>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">According to current accounting standards, operating cash flows may be disclosed using either the direct or the indirect method. The direct method simply lists the net cash flow by type of cash receipt and payment category. For purposes of illustration, the direct method appears below.</span></div>
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
</div>
<table border="0" cellpadding="0" cellspacing="0" style="color: #333333; font-size: 14px; line-height: 21px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: center;"><tbody style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">The Greener Landscape Group Statement of Cash Flows For the Month Ended April 30, 20X2</span></strong></strong><br />
<table border="1" bordercolor="#000000" cellpadding="4" cellspacing="0" frame="border" rules="none" style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" summary="
The Greener Landscape Group Statement of Cash Flows For the Month Ended April 30, 20X2
"><tbody style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>Cash Flows from Operating Activities</b></span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Cash from Customers</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">$ 870</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Cash to Employees</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">(200)</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Cash to Suppliers</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">(1,265)</span></u></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Cash Flow Used by Operating Activities</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">(595)</span></u></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cash Flows from Investing Activities</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Purchases of Equipment</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">(8,000)</span></u></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cash Flows from Financing Activities</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"></td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Investment by Owner</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">15,000</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> Withdrawal by Owner</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">(50)</span></u></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;"> <b>Cash Flow Provided by Financing Activities</b></span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">14,950</span></u></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">Net Increase in Cash</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">6,355</span></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">Beginning Cash, April 1</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">0</span></u></div>
</td></tr>
<tr style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: left;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Arial, Helvetica, sans-serif;">Ending Cash, April 30</span></div>
</td><td style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: solid; border-bottom-width: 1px; border-right-color: rgb(0, 0, 0); border-right-style: solid; border-right-width: 1px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 4px; padding-right: 4px; padding-top: 0px; text-align: right;" valign="top"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<u style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">$6,355</span></u></div>
</td></tr>
</tbody></table>
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</tbody></table>
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</div>
<h2 class="article-title" id="top" style="clear: both; color: #333333; font-size: 26px; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: left;">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-weight: normal;"><br /></span></h2>
<h2 style="text-align: left;">
<b style="background-color: white; font-family: Arial, Helvetica, sans-serif;">Financial Reporting Objectives:</b></h2>
<div>
<span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; text-align: justify;">Financial statements are prepared according to agreed upon guidelines. In order to understand these guidelines, it helps to understand the objectives of financial reporting. The objectives of financial reporting, as discussed in the Financial Accounting standards Board (FASB) </span><em style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Statement of Financial Accounting Concepts No. 1</em><span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; text-align: justify;">, are to provide information that</span></div>
<div class="article-content" id="article" style="font: normal normal normal 14px/21px Verdana, Arial, sans-serif; margin-bottom: 8px; margin-left: 0px; margin-right: 0px; margin-top: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 5px; padding-left: 0px; padding-right: 0px; padding-top: 5px;">
<div class="article-content" id="article" style="font: normal normal normal 14px/21px Verdana, Arial, sans-serif; margin-bottom: 8px; margin-left: 0px; margin-right: 0px; margin-top: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 5px; padding-left: 0px; padding-right: 0px; padding-top: 5px;">
<div style="color: #333333; margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
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<ol style="margin-bottom: 1em; margin-left: 0px; margin-right: 0px; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" type="1">
<li style="margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">is useful to existing and potential investors and creditors and other users in making rational investment, credit, and similar decisions;</span></div>
</li>
<li style="margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">helps existing and potential investors and creditors and other usear to assess the amounts, timing, and uncertainty of pro spective net cash inflows to the enterprise;</span></div>
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<span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; text-align: left;">G</span><span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: left;">enerally Accepted Accounting Principles:</span></h2>
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<span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif;">Accountants use </span><strong style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">generally accepted accounting principles (GAAP)</strong><span style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif;"> to guide them in recording and reporting financial information. GAAP comprises a broad set of principles that have been developed by the accounting profession and the Securities and Exchange Commission (SEC). Two laws, the Securities Act of 1933 and the Securities Exchange Act of 1934, give the SEC authority to establish reporting and disclosure requirements. However, the SEC usually operates in an oversight capacity, allowing the FASB and the Governmental Accounting Standards Board (GASB) to establish these requirements. The GASB develops accounting standards for state and local governments.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The current set of principles that accountants use rests upon some underlying assumptions. The basic assumptions and principles presented on the next several pages are considered GAAP and apply to most financial statements. In addition to these concepts, there are other, more technical standards accountants must follow when preparing financial statements. Some of these are discussed later in this book, but other are left for more advanced study.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Economic entity assumption</strong>. Financial records must be separately maintained for each economic entity. Economic entities include businesses, governments, school districts, churches, and other social organizations. Although accounting information from many different entities may be combined for financial reporting purposes, every economic event must be associated with and recorded by a specific entity. In addition, business records must not include the personal assets or liabilities of the owners.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Monetary unit assumption</strong>. An economic entity's accounting records include only quantifiable transactions. Certain economic events that affect a company, such as hiring a new chief executive officer or introducing a new product, cannot be easily quantified in monetary units and, therefore, do not appear in the company's accounting records. Furthermore, accounting records must be recorded using a stable currency. Businesses in the United States usually use U.S. dollars for this purpose.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Full disclosure principle</strong>. Financial statements normally provide information about a company's past performance. However, pending lawsuits, incomplete transactions, or other conditions may have imminent and significant effects on the company's financial status. The full disclosure principle requires that financial statements include disclosure of such information. Footnotes supplement financial statements to convey this information and to describe the policies the company uses to record and report business transactions.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Time period assumption</strong>. Most businesses exist for long periods of time, so artificial time periods must be used to report the results of business activity. Depending on the type of report, the time period may be a day, a month, a year, or another arbitrary period. Using artificial time periods leads to questions about when certain transactions should be recorded. For example, how should an accountant report the cost of equipment expected to last five years? Reporting the entire expense during the year of purchase might make the company seem unprofitable that year and unreasonably profitable in subsequent years. Once the time period has been established, accountants use GAAP to record and report that accounting period's transactions.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Accrual basis accounting</strong>. In most cases, GAAP requires the use of accrual basis accounting rather than cash basis accounting. <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Accrual basis accounting,</strong> which adheres to the revenue recognition, matching, and cost principles discussed below, captures the financial aspects of each economic event in the accounting period in which it occurs, regardless of when the cash changes hands. Under cash basis accounting, revenues are recognized only when the company receives cash or its equivalent, and expenses are recognized only when the company pays with cash or its equivalent.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Revenue recognition principle</strong>. Revenue is earned and recognized upon product delivery or service completion, without regard to the timing of cash flow. Suppose a store orders five hundred compact discs from a wholesaler in March, receives them in April, and pays for them in May. The wholesaler recognizes the sales revenue in April when delivery occurs, not in March when the deal is struck or in May when the cash is received. Similarly, if an attorney receives a $100 retainer from a client, the attorney doesn't recognize the money as revenue until he or she actually performs $100 in services for the client.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Matching principle</strong>. The costs of doing business are recorded in the same period as the revenue they help to generate. Examples of such costs include the cost of goods sold, salaries and commissions earned, insurance premiums, supplies used, and estimates for potential warranty work on the merchandise sold. Consider the wholesaler who delivered five hundred CDs to a store in April. These CDs change from an asset (inventory) to an expense (cost of goods sold) when the revenue is recognized so that the profit from the sale can be determined.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Cost principle</strong>. Assets are recorded at cost, which equals the value exchanged at the time of their acquisition. In the United States, even if assets such as land or buildings appreciate in value over time, they are not revalued for financial reporting purposes.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Going concern principle</strong>. Unless otherwise noted, financial statements are prepared under the assumption that the company will remain in business indefinitely. Therefore, assets do not need to be sold at fire-sale values, and debt does not need to be paid off before maturity. This principle results in the classification of assets and liabilities as short-term (current) and long-term. <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Long-term assets</strong> are expected to be held for more than one year. <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Long-term liabilities</strong>are not due for more than one year.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Relevance, reliability, and consistency</strong>. To be useful, financial information must be relevant, reliable, and prepared in a consistent manner. <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Relevant information helps</strong> a decision maker understand a company's past performance, present condition, and future outlook so that informed decisions can be made in a timely manner. Of course, the information needs of individual users may differ, requiring that the information be presented in different formats. Internal users often need more detailed information than external users, who may need to know only the company's value or its ability to repay loans. <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Reliable information</strong> is verifiable and objective. <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Consistent information</strong> is prepared using the same methods each accounting period, which allows meaningful comparisons to be made between different accounting periods and between the financial statements of different companies that use the same methods.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Principle of conservatism</strong>. Accountants must use their judgment to record transactions that require estimation. The number of years that equipment will remain productive and the portion of accounts receivable that will never be paid are examples of items that require estimation. In reporting financial data, accountants follow the <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">principle of conservatism,</strong> which requires that the less optimistic estimate be chosen when two estimates are judged to be equally likely. For example, suppose a manufacturing company's Warranty Repair Department has documented a three-percent return rate for product X during the past two years, but the company's Engineering Department insists this return rate is just a statistical anomaly and less than one percent of product X will require service during the coming year. Unless the Engineering Department provides compelling evidence to support its estimate, the company's accountant must follow the principle of conservatism and plan for a three-percent return rate. Losses and costs—such as warranty repairs—are recorded when they are probable and reasonably estimated. Gains are recorded when realized.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Materiality principle</strong>. Accountants follow the <strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">materiality principle</strong>, which states that the requirements of any accounting principle may be ignored when there is no effect on the users of financial information. Certainly, tracking individual paper clips or pieces of paper is immaterial and excessively burdensome to any company's accounting department. Although there is no definitive measure of materiality, the accountant's judgment on such matters must be sound. Several thousand dollars may not be material to an entity such as General Motors, but that same figure is quite material to a small, family-owned business.</span><br />
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<strong style="background-color: white; font-family: Arial, Helvetica, sans-serif; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">Internal control</strong><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; text-align: justify;"> is the process designed to ensure reliable financial reporting, effective and efficient operations, and compliance with applicable laws and regulations. Safeguarding assets against theft and unauthorized use, acquisition, or disposal is also part of internal control.</span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">Control environment. The management style and the expectations of upper-level managers, particularly their control policies, determine the control environment. An effective control environment helps ensure that established policies and procedures are followed. The control environment includes independent oversight provided by a board of directors and, in publicly held companies, by an audit committee; management's integrity, ethical values, and philosophy; a defined organizational structure with competent and trustworthy employees; and the assignment of authority and responsibility.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Control activities. Control activities</strong> are the specific policies and procedures management uses to achieve its objectives. The most important control activities involve segregation of duties, proper authorization of transactions and activities, adequate documents and records, physical control over assets and records, and independent checks on performance. A short description of each of these control activities appears below.</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Segregation of duties</strong> requires that different individuals be assigned responsibility for different elements of related activities, particularly those involving authorization, custody, or recordkeeping. For example, the same person who is responsible for an asset's recordkeeping should not be respon sible for physical control of that asset Having different indi viduals perform these functions creates a system of checks and balances.</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Proper authorization</strong> of transactions and activities helps ensure that all company activities adhere to established guide lines unless responsible managers authorize another course of action. For example, a fixed price list may serve as an official authorization of price for a large sales staff. In addition, there may be a control to allow a sales manager to authorize reason able deviations from the price list.</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Adequate documents and records</strong> provide evidence that financial statements are accurate. Controls designed to ensure adequate recordkeeping include the creation of invoices and other documents that are easy to use and sufficiently informa tive; the use of prenumbered, consecutive documents; and the timely preparation of documents.</span></div>
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<li style="list-style: inherit; margin-bottom: 0px; margin-left: 40px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><div style="margin-bottom: 1em; margin-top: 1em; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Physical control</strong> over assets and records helps protect the company's assets. These control activities may include elec tronic or mechanical controls (such as a safe, employee ID cards, fences, cash registers, fireproof files, and locks) or computer-related controls dealing with access privileges or established backup and recovery procedures.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Independent checks</strong> on performance, which are carried out by employees who did not do the work being checked, help ensure the reliability of accounting information and the efficiency of operations. For example, a supervisor verifies the accuracy of a retail clerk's cash drawer at the end of the day. Internal auditors may also verity that the supervisor performed the check of the cash drawer.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">In order to identify and establish effective controls, management must continually assess the risk, monitor control implementation, and modify controls as needed. Top managers of publicly held companies must sign a statement of responsibility for internal controls and include this statement in their annual report to stockholders.</span></div>
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<span style="color: blue; font-family: Arial, Helvetica, sans-serif;">Source:www.cliffsnotes.com</span></div>
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</div>Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-63231191757785137862012-07-05T22:02:00.001-07:002012-07-18T05:13:53.809-07:00Accounting Standards - Detail Explain<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial, Helvetica, sans-serif;"></span><strong><span style="font-family: Arial, Helvetica, sans-serif;">Accounting Standards : </span></strong></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Accounting </strong>is the art of recording transactions in the best manner possible, so as to enable the reader to arrive at judgments/come to conclusions, and in this regard it is utmost necessary that there are set guidelines. These guidelines are generally called accounting policies. The intricacies of accounting policies permitted Companies to alter their accounting principles for their benefit. This made it impossible to make comparisons. In order to avoid the above and to have a harmonised accounting principle, Standards needed to be set by recognised accounting bodies. This paved the way for Accounting Standards to come into existence.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Accounting Standards</strong> in India are issued By the Institute of Chartered Accountanst of India (ICAI). At present there are 30 Accounting Standards issued by ICAI.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Objective of Accounting Standards</strong></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Objective of Accounting Standards is to standarize the diverse accounting policies and practices with a view to eliminate to the extent possible the non-comparability of financial statements and the reliability to the financial statements.</span> </div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The institute of Chatered Accountants of India, recognizing the need to harmonize the diversre accounting policies and practices, constituted at Accounting Standard Board (ASB) on 21st April, 1977.</span> </div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Compliance with Accounting Standards issued by ICAI</strong></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Sub Section(3A) to section 211 of Companies Act, 1956 requires that every Profit/Loss Account and Balance Sheet shall comply with the Accounting Standards. 'Accounting Standards' means the standard of accounting recomended by the ICAI and prescribed by the Central Government in consultation with the National Advisory Committee on Accounting Standards(NACAs) constituted under section 210(1) of companies Act, 1956.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Accounting Standards Issued by the Institute of Chatered Accountants of India are as below:</strong></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Disclosure of accounting policies.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Valuation Of Inventories.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Cash Flow Statements.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Contingencies and events Occurring after the Balance sheet Date</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Net Profit or loss For the period, Prior period items and Changes in accounting Policies. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Depreciation accounting. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Construction Contracts. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Revenue Recognition. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Accounting For Fixed Assets. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The Effect of Changes In Foreign Exchange Rates.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Accounting For Government Grants.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Accounting For Investments. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Accounting For Amalgamation. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Employee Benefits. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Borrowing Cost.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Segment Reporting. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Related Party Disclosures. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Accounting For Leases.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Earning Per Share. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Consolidated Financial Statement.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Accounting For Taxes on Income. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Accounting for Investment in associates in Consolidated Financial Statement.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Discontinuing Operation. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Interim Financial Reporting.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Intangible assets.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Financial Reporting on Interest in joint Ventures.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Impairment Of assets. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Provisions, Contingent, liabilities and Contingent assets. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Financial instrument. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Financial Instrument: presentation. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Financial Instruments, Disclosures and Limited revision to accounting standards. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"></span><span style="font-family: Arial, Helvetica, sans-serif;"><strong>Disclosure of Accounting Policies:</strong> Accounting Policies refer to specific accounting principles and the method of applying those principles adopted by the enterprises in preparation and presentation of the financial statements.</span><span style="font-family: Arial, Helvetica, sans-serif;"> </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Valuation of Inventories:</strong> The objective of this standard is to formulate the method of computation of cost of inventories / stock, determine the value of closing stock / inventory at which the inventory is to be shown in balance sheet till it is not sold and recognized as revenue.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Cash Flow Statements:</strong> Cash flow statement is additional information to user of financial statement. This statement exhibits the flow of incoming and outgoing cash. This statement assesses the ability of the enterprise to generate cash and to utilize the cash. This statement is one of the tools for assessing the liquidity and solvency of the enterprise.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Contigencies and Events occuring after the balance sheet date:</strong> In preparing financial statement of a particular enterprise, accounting is done by following accrual basis of accounting and prudent accounting policies to calculate the profit or loss for the year and to recognize assets and liabilities in balance sheet. While following the prudent accounting policies, the provision is made for all known liabilities and losses even for those liabilities / events, which are probable. Professional judgement is required to classify the likehood of the future events occuring and, therefore, the question of contingencies and their accounting arises.</span> </div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Objective of this standard is to prescribe the accounting of contigencies and the events, which take place after the balance sheet date but before approval of balance sheet by Board of Directors. The Accounting Standard deals with Contingencies and Events occuring after the balance sheet date.</span> </div>
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<span style="font-family: Arial, Helvetica, sans-serif;"></span><span style="font-family: Arial, Helvetica, sans-serif;"><strong>Net Profit or Loss for the Period, Prior Period Items and change in Accounting Policies :</strong> The objective of this accounting standard is to prescribe the criteria for certain items in the profit and loss account so that comparability of the financial statement can be enhanced. Profit and loss account being a period statement covers the items of the income and expenditure of the particular period. This accounting standard also deals with change in accounting policy, accounting estimates and extraordinary items.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Depreciation Accounting :</strong> It is a measure of wearing out, consumption or other loss of value of a depreciable asset arising from use, passage of time. Depreciation is nothing but distribution of total cost of asset over its useful life.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Construction Contracts : </strong>Accounting for long term construction contracts involves question as to when revenue should be recognized and how to measure the revenue in the books of contractor. As the period of construction contract is long, work of construction starts in one year and is completed in another year or after 4-5 years or so. Therefore question arises how the profit or loss of construction contract by contractor should be determined. There may be following two ways to determine profit or loss: On year-to-year basis based on percentage of completion or On cpmpletion of the contract.</span><span style="font-family: Arial, Helvetica, sans-serif;"> </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Revenue Recognition :</strong> The standard explains as to when the revenue should be recognized in profit and loss account and also states the circumstances in which revenue recognition can be postponed. Revenue means gross inflow of cash, receivable or other consideration arising in the course of ordinary activities of an enterprise such as:- The sale of goods, Rendering of Services, and Use of enterprises resources by other yeilding interest, dividend and royalties. In other words, revenue is a charge made to customers / clients for goods supplied and services rendered.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"></span><span style="font-family: Arial, Helvetica, sans-serif;"><strong>Accounting for Fixed Assets :</strong> It is an asset, which is:- Held with intention of being used for the purpose of producing or providing goods and services. Not held for sale in the normal course of business. Expected to be used for more than one accounting period.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>The Effects of changes in Foreign Exchange Rates :</strong> Effect of Changes in Foreign Exchange Rate shall be applicable in Respect of Accounting Period commencing on or after 01-04-2004 and is mandatory in nature. This accounting Standard applicable to accounting for transaction in Foreign currencies in translating in the Financial Statement Of foreign operation Integral as well as non- integral and also accounting for For forward exchange.Effect of Changes in Foreign Exchange Rate, an enterprises should disclose following aspects:</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Amount Exchange Difference included in Net profit or Loss; </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Amount accumulated in foreign exchange translation reserve; </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Reconciliation of opening and closing balance of Foreign Exchange translation reserve; </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Accounting for Government Grants :</strong> Governement Grants are assistance by the Govt. in the form of cash or kind to an enterprise in return for past or future compliance with certain conditions. Government assistance, which cannot be valued reasonably, is excluded from Govt. grants,. Those transactions with Governement, which cannot be distinguished from the normal trading transactions of the enterprise, are not considered as Government grants.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"></span><span style="font-family: Arial, Helvetica, sans-serif;"><strong>Accounting for Investments :</strong> It is the assets held for earning income by way of dividend, interest and rentals, for capital appreciation or for other benefits.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"></span><span style="font-family: Arial, Helvetica, sans-serif;"><strong>Accounting for Amalgamation :</strong> This accounting standard deals with accounting to be made in books of Transferee company in case of amalgamtion. This accounting standard is not applicable to cases of acquisition of shares when one company acquires / purcahses the share of another company and the acquired company is not dissolved and its seperate entity continues to exist. The standard is applicable when acquired company is dissolved and seperate entity ceased exist and purchasing company continues with the business of acquired company.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Employee Benefits :</strong> Accounting Standard has been revised by ICAI and is applicable in respect of accounting periods commencing on or after 1st April 2006. the scope of the accounting standard has been enlarged, to include accounting for short-term employee benefits and termination benefits. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Borrowing Costs :</strong> Enterprises are borrowing the funds to acquire, build and install the fixed assets and other assets, these assets take time to make them useable or saleable, therefore the enterprises incur the interest (cost on borrowing) to acquire and build these assets. The objective of the Accounting Standard is to prescribe the treatment of borrowing cost (interest + other cost) in accounting, whether the cost of borrowing should be included in the cost of assets or not.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Segment Reporting :</strong> An enterprise needs in multiple products/services and operates in different geographical areas. Multiple products / services and their operations in different geographical areas are exposed to different risks and returns. Information about multiple products / services and their operation in different geographical areas are called segment information. Such information is used to assess the risk and return of multiple products/services and their operation in different geographical areas. Disclosure of such information is called segment reporting.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Related Paty Disclosure :</strong> Sometimes business transactions between related parties lose the feature and character of the arms length transactions. Related party relationship affects the volume and decision of business of one enterprise for the benefit of the other enterprise. Hence disclosure of related party transaction is essential for proper understanding of financial performance and financial position of enterprise.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Accounting for leases :</strong> Lease is an arrangement by which the lesser gives the right to use an asset for given period of time to the lessee on rent. It involves two parties, a lessor and a lessee and an asset which is to be leased. The lessor who owns the asset agrees to allow the lessee to use it for a specified period of time in return of periodic rent payments.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Earning Per Share :</strong>Earning per share (EPS)is a financial ratio that gives the information regarding earning available to each equiy share. It is very important financial ratio for assessing the state of market price of share. This accounting standard gives computational methodology for the determination and presentation of earning per share, which will improve the comparison of EPS. The statement is applicable to the enterprise whose equity shares or potential equity shares are listed in stock exchange.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Consolidated Financial Statements :</strong> The objective of this statement is to present financial statements of a parent and its subsidiary (ies) as a single economic entity. In other words the holding company and its subsidiary (ies) are treated as one entity for the preparation of these consolidated financial statements. Consolidated profit/loss account and consolidated balance sheet are prepared for disclosing the total profit/loss of the group and total assets and liabilities of the group. As per this accounting standard, the conslidated balance sheet if prepared should be prepared in the manner prescribed by this statement.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Accounting for Taxes on Income :</strong> </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">This accounting standard prescribes the accounting treatment for taxes on income. Traditionally, amount of tax payable is determined on the profit/loss computed as per income tax laws. According to this accounting standard, tax on income is determined on the principle of accrual concept. According to this concept, tax should be accounted in the period in which corresponding revenue and expenses are accounted. In simple words tax shall be accounted on accrual basis; not on liability to pay basis.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Accounting for Investments in Associates in consolidated financial statements : </strong>The accounting standard was formulated with the objective to set out the principles and procedures for recognizing the investment in associates in the cosolidated financial statements of the investor, so that the effect of investment in associates on the financial position of the group is indicated.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Discontinuing Operations : </strong>The objective of this standard is to establish principles for reporting information about discontinuing operations. This standard covers "discontinuing operations" rather than "discontinued operation". The focus of the disclosure of the Information is about the operations which the enterprise plans to discontinue rather than dsclosing on the operations which are already discontinued. However, the disclosure about discontinued operation is also covered by this standard.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Interim Financial Reporting (IFR) :</strong> Interim financial reporting is the reporting for periods of less than a year generally for a period of 3 months. As per clause 41 of listing agreement the companies are required to publish the financial results on a quarterly basis. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Intangible Assets :</strong> An Intangible Asset is an Identifiable non-monetary Asset without physical substance held for use in the production or supplying of goods or services for rentals to others or for administrative purpose.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Financial Reporting of Interest in joint ventures :</strong> Joint Venture is defined as a contractual arrangement whereby two or more parties carry on an economic activity under 'joint control'. Control is the power to govern the financial and operating policies of an economic activity so as to obtain benefit from it. 'Joint control' is the contractually agreed sharing of control over economic activity.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Impairment of Assets :</strong> The dictionary meanong of 'impairment of asset' is weakening in value of asset. In other words when the value of asset decreases, it may be called impairment of an asset. As per AS-28 asset is said to be impaired when carrying amount of asset is more than its recoverable amount.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Provisions, Contingent Liabilities And Contingent Assets : </strong>Objective of this standard is to prescribe the accounting for Provisions, Contingent Liabilitites, Contingent Assets, Provision for restructuring cost. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Provision: It is a liability, which can be measured only by using a substantial degree of estimation.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Liability: A liability is present obligation of the enterprise arising from past events the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Financial Instrument:</strong> Recognition and Measurement, issued by The Council of the Institute of Chartered Accountants of India, comes into effect in respect of Accounting periods commencing on or after 1-4-2009 and will be recommendatory in nature for An initial period of two years. This Accounting Standard will become mandatory in respect of Accounting periods commencing on or after 1-4-2011 for all commercial, industrial and business Entities except to a Small and Medium-sized Entity. The objective of this Standard is to establish principles for recognizing and measuring Financial assets, financial liabilities and some contracts to buy or sell non-financial items. Requirements for presenting information about financial instruments are in Accounting Standard. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Financial Instrument: presentation :</strong> The objective of this Standard is to establish principles for presenting financial instruments as liabilities or equity and for offsetting financial assets and financial liabilities. It applies to the classification of financial instruments, from the perspective of the issuer, into financial assets, financial liabilities and equity instruments; the classification of related interest, dividends, losses and gains; and the circumstances in which financial assets and financial liabilities should be offset. The principles in this Standard complement the principles for recognising and measuring financial assets and financial liabilities in Accounting Standard Financial Instruments: </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><strong>Financial Instruments, Disclosures and Limited revision to accounting standards:</strong> The objective of this Standard is to require entities to provide disclosures in their financial statements that enable users to evaluate: </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">the significance of financial instruments for the entity’s financial position and performance; and </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the reporting date, and how the entity manages those risks.</span></div>
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<span style="color: blue;"><span style="font-family: Arial, Helvetica, sans-serif;">Source : </span><span style="font-family: Arial, Helvetica, sans-serif;">http://www.saralaccounts.com</span></span></div>
</div>Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-71652783045109946442012-06-18T06:01:00.000-07:002012-07-06T19:08:41.428-07:00How to Register a Company in India<div dir="ltr" style="text-align: left;" trbidi="on">
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<b><u><span style="color: black; font-size: medium;"><span style="color: black; font-family: Arial, Helvetica, sans-serif; font-size: 13.5pt; font-weight: bold;">Introduction - Forming A Company In India:</span></span></u></b><span style="color: black;"><span style="color: black;"></span></span></div>
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<span style="color: black; font-size: x-small;"><span style="color: black; font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">The Companies Act of 1956 sets down rules for the establishment of both public and private companies. The most commonly used corporate form is the limited company, unlimited companies being relatively uncommon. A company is formed by registering the Memorandum and Articles of Association with the State Registrar of Companies of the state in which the main office is to be located.</span></span></div>
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<span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;"><span style="font-family: Arial, Helvetica, sans-serif;">Foreign companies engaged in manufacturing and trading activities abroad are permitted by the Reserve Bank of India to open branch offices in India for the purpose of carrying on the following activities in India:<b><span style="font-weight: bold;"> </span></b></span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">To represent the parent company or other foreign companies in various matters in India, for example, acting as buying/selling agents in India, etc.</span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">To conduct research work in which the parent company is engaged provided the results of the research work are made available to Indian companies </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">T</span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">o undertake export and import trading activities.</span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: small;"><span style="color: black; font-size: 12pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">T</span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">o promote possible technical and financial collaboration between Indian companies and overseas companies.</span></span><span style="color: black;"><span style="color: black;"></span></span></span></div>
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<span style="color: black; font-size: x-small;"><span style="color: black; font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Application for permission to open a branch, a project office or liaison office is made via the Reserve Bank of India by submitting form FNC-5 to the Controller, Foreign Investment and Technology Transfer Section of the Reserve Bank of India. For opening a project or site office, application may be made on Form FNC-10 to the regional offices of the Reserve Bank of India. A foreign investor need not have a local partner, whether or not the foreigner wants to hold full equity of the company. The portion of the equity thus not held by the foreign investor can be offered to the public.</span></span><span style="color: black;"><span style="color: black;"></span></span></div>
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<b><u><span style="color: black; font-size: medium;"><span style="color: black; font-family: Arial, Helvetica, sans-serif; font-size: 13.5pt; font-weight: bold;">Incorporating a Company - Approval of Name:</span></span></u></b></div>
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<span style="color: black; font-size: x-small;"><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">The first step in the formation of a company is the approval of the name by the Registrar of Companies (ROC) in the State/Union Territory in which the company will maintain its Registered Office. </span></span></div>
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<span style="color: black; font-size: x-small;"><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">This approval is provided subject to certain conditions: </span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: navy; font-size: x-small;"><span style="color: navy; font-size: 10pt;">Fo</span></span><span style="font-size: x-small;"><span style="font-size: 10pt;">r instance, there should not be an existing company by the same name. </span></span></span></div>
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<span style="color: black; font-size: x-small;"><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Further, the last words in the name are required to be "Private Ltd." in the case of a private company and "Limited" in the case of a Public Company. </span></span></div>
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<span style="color: black; font-size: x-small;"><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">The application should mention at least four suitable names of the proposed company, in order of preference. </span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="font-size: 10pt;">In the case of a private limited company, the name of the company should end with the words "Private Limited" as the last words.</span></span> <span style="font-size: x-small;"><span style="font-size: 10pt;"></span></span></span></div>
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<span style="color: black; font-size: x-small;"><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">In case of a public limited company, the name of the company should end with the word "Limited" as the last word. </span></span></div>
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<span style="color: black; font-size: x-small;"><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">The ROC generally informs the applicant within seven days from the date of submission of the application, whether or not any of the names applied for is available. </span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="font-size: 10pt;">Once a name is approved, it is valid for a period of six months, within which time Memorandum of Association and Articles of Association together with miscellaneous documents should be filed.</span></span> <span style="font-size: x-small;"><span style="font-size: 10pt;"></span></span></span></div>
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<span style="color: black; font-size: x-small;"><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">If one is unable to do so, an application may be made for renewal of name by paying additional fees. </span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="font-size: 10pt;">After obtaining the name approval, it normally takes approximately two to three weeks to incorporate a company depending on where the company is registered</span></span> </span></div>
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<span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;"></span></span><span style="font-family: Arial, Helvetica, sans-serif;"> <b><u><span style="color: black; font-size: medium;"><span style="color: black; font-size: 13.5pt; font-weight: bold;">Memorandum of Articles:</span></span></u></b><span style="color: black;"><span style="color: black;"></span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">The Memorandum of Association and Articles of Association are the most important documents to be submitted to the ROC for the purpose of incorporation of a company. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">The Memorandum of Association is a document that sets out the constitution of the company. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">It contains, amongst others, the objectives and the scope of activity of the company besides also defining the relationship of the company with the outside world.</span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">The Articles of Association contain the rules and regulations of the company for the management of its internal affairs. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">While the Memorandum specifies the objectives and purposes for which the Company has been formed, the Articles lay down the rules and regulations for achieving those objectives and purposes.</span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">The ROC will give the certificate of incorporation after the required documents are presented along with the requisite registration fee, which is scaled according to the share capital of the company, as stated in its Memorandum. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">A private company can commence business on receipt of its certificate of incorporation.</span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">A public company has the option of inviting the public for subscription to its share capital. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">Accordingly, the company has to issue a prospectus, which provides information about the company to potential investors. The Companies Act specifies the information to be contained in the prospectus.</span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">The prospectus has to be filed with the ROC before it can be issued to the public. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">In case the company decides not to approach the public for the necessary capital and obtains it privately, it can file a "Statement in Lieu of Prospectus" with the ROC. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">On fulfillment of these requirements, the ROC issues a Certificate of Commencement of Business to the public company. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">The company can commence business immediately after it receives this certificate</span></span></span></div>
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<b><u><span style="color: black; font-size: medium;"><span style="color: black; font-family: Arial, Helvetica, sans-serif; font-size: 13.5pt; font-weight: bold;">Certificate of Incorporation:</span></span></u></b></div>
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<span style="color: black; font-size: x-small;"><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">After the duly stamped Memorandum of Association and Articles of Association, documents and forms are filed and the filing fees are paid, the ROC scrutinizes the documents and, if necessary, instructs the authorised person to make necessary corrections. </span></span></div>
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<span style="color: black; font-size: x-small;"><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Thereafter, a Certificate of Incorporation is issued by the ROC, from which date the company comes in to existence. </span></span></div>
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<span style="color: black; font-size: x-small;"><span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">It takes one to two weeks from the date of filing Memorandum of Association and Articles of Association to receive a Certificate of Incorporation. </span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="font-size: 10pt;">Although a private company can commence business immediately after receiving the certificate of incorporation, a public company cannot do so until it obtains a Certificate of Commencement of Business from the ROC</span></span> </span></div>
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<span style="color: navy; font-size: x-small;"><span style="color: navy; font-size: 10pt;"></span></span><span style="font-family: Arial, Helvetica, sans-serif;"> <b><u><span style="color: black; font-size: medium;"><span style="color: black; font-size: 13.5pt; font-weight: bold;">Miscellaneous Documents:</span></span></u></b><span style="color: black;"><span style="color: black;"></span></span></span></div>
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<span style="color: black; font-size: x-small;"><span style="color: black; font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">The documents/forms stated below are filed along with Memorandum of Association and Articles of Association on payment of filing fees (depending on the authorised capital of the company): </span></span><span style="color: black;"><span style="color: black;"></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">Declaration of compliance duly stamped. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">Notice of the situation of the registered office of the company.</span></span><span style="color: navy; font-size: x-small;"><span style="color: navy; font-size: 10pt;"> </span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;"></span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">Particulars of Directors, Manager or Secretary.</span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">Authority executed on a non-judicial stamp paper, in favour of one of the subscribers to the Memorandum of Association or any other person authorizing him to file the documents and papers for registration and to make necessary corrections, if any.</span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: small;"><span style="color: black; font-size: 12pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">The ROC’s letter (in original) indicating the availability of the name.</span></span><span style="color: black;"><span style="color: black;"></span></span></span></div>
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<b><u><span style="color: black; font-size: medium;"><span style="color: black; font-family: Arial, Helvetica, sans-serif; font-size: 13.5pt; font-weight: bold;">With whom to be filed:</span></span></u></b></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">With </span></span><span style="color: navy; font-size: x-small;"><span style="color: navy; font-size: 10pt;">“T</span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">he Registrar of Companies</span></span><span style="color: navy; font-size: x-small;"><span style="color: navy; font-size: 10pt;">”</span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;"> of the State in which the company is to be registered.</span></span><span style="color: black;"><span style="color: black;"></span></span></span></div>
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<b><u><span style="color: black; font-size: medium;"><span style="color: black; font-family: Arial, Helvetica, sans-serif; font-size: 13.5pt; font-weight: bold;">Documents required to be submitted:</span></span></u></b><span style="color: black;"><span style="color: black;"></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">A printed copy each of the Memorandum and Articles of Association of the proposed company filed along with the declaration duly stamped with the requisite value of adhesive stamps from the State/ Union Territory Treasury . </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">Below the subscription clause the subscribers to the Memorandum should write in his own handwriting his full name and father's, or husband's full name in block letters, full address, occupation, e.g.,'business executive, engineer, housewife, etc. and number of equity shares taken and then put his or her signatures in the column meant for signature. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">Similarly at the end of the Articles Of Association the subscriber should write in his own handwriting : </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: navy; font-size: x-small;"><span style="color: navy; font-size: 10pt;">H</span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">is full name and father's full name in block letters, full address, occupation. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">The signatures of the subscribers to the Memorandum and the Article of Association should be witnessed by one person preferably by the person representing the subscribers, for registration of the proposed company before the Registrar of Companies. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">Under column 'Total number of equity shares' write the total of the shares taken by the subscribers e.g., 20 (Twenty) only. Mention date e.g. 5th day of August, 1996. Place-</span></span><span style="color: navy; font-size: x-small;"><span style="color: navy; font-size: 10pt;"> </span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">eg</span></span><span style="color: navy; font-size: x-small;"><span style="color: navy; font-size: 10pt;">., </span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">'New Delhi'. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">With the stamped copy, one spare copy each of the Memorandum and Articles of Association of the proposed company.</span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">Original copy of the letter of the Registrar of Companies intimating the availability of name. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">Form No. 18 - Situation of registered office of the proposed company. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">Form No. 29-Consent to act as a director etc. Dates on the consent Form and the undertaking letters should be the same as is mentioned in the Memorandum of Association signed by the director himself. A private company and a wholly-owned Government company are not required to file Form No. 29. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">Form No. 32 (in duplicate). Particulars of proposed, directors, manager or secretary. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">Power of attorney duly typed on a non-judicial stamp paper of the requisite value. The stamp paper should be purchased in the name of the persons signing the authority. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> </span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">No objection letter from the persons whose name has been given in application for vailability of name in Form No. 1-A as promoters/directors but are not interested at a later stage should be obtained filed with the Registrar at the time of submitting documents, for registration. </span></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">·<span style="font-size: xx-small;"> T</span></span></span><span style="color: black; font-size: x-small;"><span style="color: black; font-size: 10pt;">he agreements, if any, which the company proposes to enter with any individual for, appointment as managing or whole-time director or manager are also to be filed.</span></span></span></div>
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Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-66359122946788800892012-06-01T20:59:00.001-07:002012-07-06T19:29:55.236-07:00Finance Terminology- Amortization,Negative Goodwill,Capital Reserve,Net Asset Value (NAV)<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;"><u><strong><span style="font-size: small;">Amortization</span></strong></u>:</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">The gradual elimination of a liability, such as a mortgage, in regular payments over a specified period of time. Such payments must be sufficient to cover both principal and interest. </span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Charges made against the interest received on a debt in order to offset a premium paid for the debt. Thus, with each periodic payment, a debtor is not only paying back interest, but also part of his or her premium. This leads to higher periodic payments than in the case when only interest is paid out. However, a payment schedule which includes premium amortization makes debt management easier, especially if the principal is large. While paying just the interest each period will lead to a low outflow of cash each month, the debtor might not save enough to pay the principal. </span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Thus, amortizing the premium each period also reduces the credit risk of the debt, since the creditor gets some part of the principal each time period, as opposed to allowing a debtor to forfeit on all of it at the maturity of the loan. Amortization of premium is a common feature in cases when a person or company takes on a large amount of debt at one time, such as a mortgage</span></span></div>
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<span style="font-family: Arial;"><span style="font-family: Arial; font-size: 10pt;"><span style="font-size: small;"><strong><u>Depreciation</u></strong>: </span></span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">A noncash expense that reduces the value of an asset as a result of wear and tear, age, or obsolescence. Most assets lose their value over time (in other words, they depreciate), and must be replaced once the end of their useful life is reached. There are several accounting methods that are used in order to write off an asset's depreciation cost over the period of its useful life. Because it is a non-cash expense, depreciation lowers the company's reported earnings while increasing free cash flow. Depreciation is used in accounting to try to match the expense of an asset to the income that the asset helps the company earn.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;"><strong><u>Example</u></strong>:</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">For example, if a company buys a piece of equipment for $1 million and expects it to have a useful life of 10 years, it will be depreciated over 10 years. Every accounting year, the company will expense $100,000 (assuming straight-line depreciation), which will be matched with the money that the equipment helps to make each year.</span></span></div>
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<span style="font-family: Arial; font-size: small;"><span style="font-family: Arial; font-size: 10pt;"><u><strong><span style="font-family: Arial; font-size: 10pt;"><span style="font-size: small;"><strong><u>Contingency Reserve:</u></strong></span></span></strong></u></span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">A reserve set aside for unforeseen events or damages. The term contingency reserve refers primarily to the amount of quantity of funds or other financial resources that is required to be allocated at and above the previously designated estimate amount to reduce the risk of overruns to an acceptable level for the financially responsible organization. However, contingency reserve need not refer exclusively to monetary terms. It can also refer to as specific quantity of time in man hours that must be allocated above and beyond the previously determined quantity of hours required to assure that any overtime or other unexpected hours of work required can be properly compensated for. </span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Typically the contingency reserves, in terms of both finance and time, are determined at the outset of a project. However, as a project is ongoing, if it appears that the project will require additional funds or time allocation to complete, contingency reserves can be instituted or modified at any time to better prepare the organization for the possibility of their usage at some point in a projects life.</span></span></div>
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<span style="font-family: Arial; font-size: small;"><span style="font-family: Arial; font-size: 10pt;"><u><strong><span style="font-family: Arial; font-size: 10pt;"><span style="font-size: small;"><strong><u>Capital Reserve: </u></strong></span></span></strong></u></span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Capital reserve is a reserve created by a company with a view to face contingencies like inflation, instability etc. in times of rising price. Normally, capital reserves are the reserves raised through non-trading activities and relates to company. For example, to boost investors’ confidence during inflation time, the book value of the company can be increased using revaluation of assets reserve. In the same way, the company can allocate certain portion of their profit for capital redemption reserves for purchasing their own company shares when the share market is in downtrend thus keeping the value of the share in check protecting the shareholders interest which is called buy back of shares. Also any profit on purchase of business, forfeiture of shares, gain on reissue of forfeited shares and debenture premium may be put under capital reserves under different heads. These capital reserves can be used to write off fictitious assets subject to certain conditions.</span></span></div>
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<span style="font-family: Arial; font-size: small;"><span style="font-family: Arial; font-size: 10pt;"></span></span><span style="font-family: Arial;"><span style="font-family: Arial; font-size: 10pt;"></span></span><br />
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;"><strong><u>General Reserve:</u></strong></span></span><br />
<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">At the end of an accounting period the company may decide to transfer part of the profits to a reserve and retain the balance in the profit and loss account. The reserve created out of profits transferred from profit and loss account is called general reserve. The balance in the profit and loss account is called a surplus and will be shown under this head in the balance sheet.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">The company can use the general reserve for various purposes including issue of bonus shares to shareholders and payment of dividend when profits are insufficient.</span></span></div>
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<span style="font-family: Arial; font-size: small;"><span style="font-family: Arial; font-size: 10pt;"><span style="font-family: Arial; font-size: small;"><span style="font-family: Arial; font-size: 10pt;"><u><strong><span style="font-family: Arial; font-size: 10pt;"><span style="font-size: small;"><strong><u>Impairment Charges:</u></strong></span></span></strong></u></span></span></span></span><span style="font-family: arial;"><span style="font-family: Arial; font-size: 10pt;"></span></span><br />
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">The term impairment refers to assets that are no longer of the same value as in a prior period. An impairment charge is used and the asset is revalued downward and a "charge" is made to net assets. An Impairment Charge is incurred when the fair value of a company's goodwill is less than the recorded value. If the fair value of goodwill is less than the recorded value, a company's goodwill is said to be "impaired" and the difference (between the fair value and recorded value) must be charged off as an expense. </span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;"><strong>Example</strong>:</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Goodwill Asset Value (Year 0) $4,000,000</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Impairment Test Results Value (Year 1) $3,000,000</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Income Statement Impact/ Impairment Charge $1,000,000</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;"></span></span><span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Negative goodwill, also called a bargain-purchase amount, occurs when a company buys an asset for less than its fair market value. Negative goodwill is the opposite of goodwill.</span></span> <br />
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<span style="font-family: Arial; font-size: small;"><span style="font-family: Arial; font-size: 10pt;"><u><strong><span style="font-family: Arial; font-size: 10pt;"><span style="font-size: small;"><strong><u>Negative Goodwill:</u></strong></span></span></strong></u></span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Negative goodwill is based on the concept of goodwill, an intangible asset that represents the worth of a company's brand name, patents, customer base and other items that are difficult to price but that help to make a company valuable. Most of the time, a company will be purchased for more than the value of its tangible assets, and the difference is attributed to goodwill. When the price paid is less than the actual value of the company's net assets, you have negative goodwill</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;"><strong>Example</strong>:</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">let's assume Company XYZ purchases the assets of Company ABC for $20,000,000. The assets are actually worth $35,000,000, but Company XYZ gets a deal because Company ABC needs cash immediately and Company XYZ was the only buyer willing to pay cash. The difference between the purchase price and the fair market value is $15,000,000. </span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Company XYZ records this as negative goodwill on its income statement, however it does not record the whole $15,000,000 at once. XYZ records the negative goodwill over the remaining weighted-average estimated useful life of the acquired assets. The remainder stays on the balance sheet as a contra asset that eventually dwindles down to zero as the assets age.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">After the acquisition is complete, Company XYZ must test the fair value of the assets for impairment. In cases where a company is acquiring future losses and expenses, the negative goodwill is deferred and recognized on the income statement as those future losses or expenses occur.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;"></span></span><span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">A strategy used by corporations to discourage hostile takeovers. With a poison pill, the target company attempts to make its stock less attractive to the acquirer. One example is the issuance of preferred stock that gives shareholders the right to redeem their shares at a premium after the takeover. </span></span><br />
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<span style="font-family: Arial; font-size: small;"><span style="font-family: Arial; font-size: 10pt;"><u><strong><span style="font-family: Arial; font-size: 10pt;"><span style="font-size: small;"><strong><u>Poison Pill:</u></strong></span></span></strong></u></span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">There are two types of poison pills: </span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">1. A "flip-in" allows existing shareholders (except the acquirer) to buy more shares at a discount. By purchasing more shares cheaply (flip-in), investors get instant profits and, more importantly, they dilute the shares held by the acquirer. This makes the takeover attempt more difficult and more expensive.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">2. A "flip-over" allows stockholders to buy the acquirer's shares at a discounted price after the merger.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">An example of a flip-over is when shareholders gain the right to purchase the stock of the acquirer on a two-for-one basis in any subsequent merger</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">A company which makes a hostile takeover bid on a target company. The acquisition of one company (called the target company) by another (called the acquirer) that is accomplished not by coming to an agreement with the target company's management, but by going directly to the company’s shareholders or fighting to replace management in order to get the acquisition approved. A hostile takeover can be accomplished through either a tender offer or a proxy fight.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;"></span></span><span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;"></span></span><br />
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">A golden parachute has been defined as an agreement between a company and an Executive specifying that the employee will receive certain significant benefits if employment is terminated. In other words, benefits given to top executives in the event that a company is taken over by another firm, resulting in the loss of their job. Benefits include items such as stock options, bonuses, severance pay, etc. </span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;"></span></span><span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;"></span></span><br />
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">A process that increases the current net value of business or shareholder capital gains, with the objective of bringing in the highest possible return. The wealth maximization strategy generally involves making sound financial investment decisions which take into consideration any risk factors that would compromise or outweigh the anticipated benefits.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Any project which generates positive net present value creates wealth to the company. When a company creates wealth from a course of action it has initiated the share holders benefit because such a course of action will increase the market value of the company’s share.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">For Example in taking an investing decision management should choose that project for investment, which will give maximum return to the share holders. </span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Similarly in other financial Decision and for that matter any decision should be taken to with the objectives of maximization of wealth of the shareholders.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;"></span></span><span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;"></span></span><br />
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">A capital gain realized by the sale or exchange of a capital asset that has been held for exactly one year or less. Short-term gains are taxed at the taxpayer's top marginal tax rate. A short-term gain can only be reduced by a short-term loss</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Short-term gains and losses are netted against each other. For example, assume a taxpayer purchased and sold two different securities during the tax year: Security A and Security B. If he/she earned a gain on Security A of $5,000 and a loss on Security B of $3,000, then the net short-term gain is $2,000 ($5,000 - $3,000). </span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">It is a term used to describe the value of an entity's assets less the value of its liabilities. The term is most commonly used in relation to open-ended or mutual funds because shares of such funds registered with the U.S. Securities and Exchange Commission are redeemed at their net asset value. Net asset value may represent the value of the total equity, or it may be divided by the number of shares outstanding held by investors and, thereby, represent the net asset value per share.[1]</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">It is calculated by totaling the value of all the fund's holdings plus money awaiting investment, subtracting operating expenses, and dividing by the number of outstanding shares.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">A fund's NAV changes regularly, though day-to-day variations are usually small.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">The NAV is the price per share an open-end mutual fund pays when you redeem, or sell back, your shares. With no-load mutual funds, the NAV and the offering price, or what you pay to buy a share, are the same. With front-load funds, the offering price is the sum of the NAV and the sales charge per share and is sometimes known as the maximum offering price (MOP).</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">The NAV of an exchange traded fund (ETF) or a closed-end mutual fund may be higher or lower than the market price of a share of the fund. With an ETF, though, the difference is usually quite small because of a unique mechanism that allows institutional investors to buy or redeem large blocks of shares at the NAV with in-kind baskets of the fund's stocks.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Working capital is the capital available for conducting day-to-day operations of the business and consists of current assets and current liabilities. In other words, working capital is needed by the business to:</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Pay suppliers and other creditors,</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Pay employees</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Pay for stocks</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Allow for customers who are allowed to buy now, but pay later (so-called “trade debtors”)</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Working capital is the difference between current assets and current liabilities: </span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Current Assets means Inventory, Trade Receivables, Cash, Short term investments, Sundry Debtors etc.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Current liabilities means Trade payables, Bank Overdraft, Sundry Creditors etc.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">Effective management of working capital ensures the organization is maximizing the benefits from net current assets by having an optimal level to meet working capital demands.</span></span></div>
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<span style="font-family: Arial; font-size: x-small;"><span style="font-family: Arial; font-size: 10pt;">The Working Capital Cycle measures the time between paying for goods supplied to you and the final receipt of cash to you from their sale. It is desirable to keep the cycle as short as possible as it increase the effectiveness of working capital. </span></span></div>
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<span style="font-family: Arial; font-size: small;"><span style="font-family: Arial; font-size: 10pt;"><u><strong><span style="font-family: Arial; font-size: 10pt;"><span style="font-size: small;"><strong><u>Working Capital Cycle:</u></strong></span></span></strong></u></span></span></div>
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<span style="font-family: Arial; font-size: small;"><span style="font-family: Arial; font-size: 10pt;"><u><strong><span style="font-family: Arial; font-size: 10pt;"><span style="font-size: small;"><strong><u>Net Asset Value (NAV): </u></strong></span></span></strong></u></span></span></div>
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<span style="font-family: Arial; font-size: small;"><span style="font-family: Arial; font-size: 10pt;"><u><strong><span style="font-family: Arial; font-size: 10pt;"><span style="font-size: small;"><strong><u>Short Term Capital Gain:</u></strong></span></span></strong></u></span></span></div>
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<span style="font-family: Arial; font-size: small;"><span style="font-family: Arial; font-size: 10pt;"><u><strong><span style="font-family: Arial; font-size: 10pt;"><span style="font-size: small;"><strong><u>Wealth Maximization:</u></strong></span></span></strong></u></span></span></div>
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<span style="font-family: Arial; font-size: small;"><span style="font-family: Arial; font-size: 10pt;"><u><strong><span style="font-family: Arial; font-size: 10pt;"><span style="font-size: small;"><strong><u>Golden Parachute: </u></strong></span></span></strong></u></span></span></div>
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<span style="font-family: Arial; font-size: small;"><span style="font-family: Arial; font-size: 10pt;"><u><strong><span style="font-family: Arial; font-size: 10pt;"><span style="font-size: small;"><strong><u>Black Knight:</u></strong></span></span></strong></u></span></span></div>
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Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-37238985906008919532012-04-09T01:55:00.000-07:002012-07-10T02:22:45.882-07:00Mutual Funds<div dir="ltr" style="text-align: left;" trbidi="on">
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<strong><span style="font-family: Arial, Helvetica, sans-serif;">Definition :</span></strong><br />
<span style="font-family: Arial, Helvetica, sans-serif;">A mutual fund is a company that brings together money from many people and invests it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are known as its <i>portfolio</i>. Each investor in the fund owns shares, which represent a part of these holdings.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Mutual Fund is a fund, managed by an investment company with the financial objective of generating high Rate of Returns. These asset management or investment management companies collects money from the investors and invests those money in different Stocks, Bonds and other financial securities in a diversified manner</span><br />
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<u><strong><span style="font-family: Arial, Helvetica, sans-serif;">Analysis :</span></strong></u><br />
<span style="font-family: Arial, Helvetica, sans-serif;">A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. Also, one doesn't have to figure out which stocks or bonds to buy. But the biggest advantage of mutual funds is diversification. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Diversification means spreading out money across many different types of investments. When one investment is down another might be up. Diversification of investment holdings reduces the risk tremendously.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">Mutual Fund is an instrument of investing money. Nowadays, bank rates have fallen down and are generally below the inflation rate. Therefore, keeping large amounts of money in bank is not a wise option, as in real terms the value of money decreases over a period of time. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">One of the options is to invest the money in stock market. But a common investor is not informed and competent enough to understand the intricacies of stock market. This is where mutual funds come to the rescue.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><strong>On the basis of their structure and objective</strong>, mutual funds can be classified into following major types: </span><br />
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<strong><span style="font-family: Arial, Helvetica, sans-serif;">1. Open End Mutual Fund :</span></strong><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Open end funds are operated by a mutual fund house which raises money from shareholders and invests in a group of assets, as per the stated objectives of the fund. Open-end funds raise money by selling shares of the fund to the public, in a manner similar to any other company, which sell its stock to raise the capital. An open-end mutual fund does not have a set number of shares. It continues to sell shares to investors and will buy back shares when investors wish to sell. Units are bought and sold at their current net asset value. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Open-end funds are required to calculate their net asset value (NAV) daily. Since the NAV of an open-end fund is calculated daily, it serves as a useful measure of its fair market value on a per-share basis. The NAV of the fund is calculated by dividing the fund's assets minus liabilities by the number of shares outstanding. Open-end funds usually charge an entry or exit load from the investors. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Most of the open-end funds are actively managed and the fund manager picks the stocks as per the objective of the fund. Open-end funds keep some portion of their assets in short-term and money market securities to provide available funds for redemptions. A large portion of most open mutual funds is invested in highly liquid securities, which enables the fund to raise money by selling securities at prices very close to those used for valuations. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Some of the benefits of open-end funds include diversification, professional money management, liquidity and convenience. But open-end funds have one negative as compared to closed-end funds. Since open-end funds are constantly under redemption pressure, they always have to keep a certain amount of money in cash, which they otherwise would have invested. This lowers the potential returns. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;"><strong>2. Closed-End Mutual Fund :</strong></span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">A closed-end mutual fund has a set number of shares issued to the public through an initial public offering. These funds have a stipulated maturity period generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Once underwritten, closed-end funds trade on stock exchanges like stocks or bonds. The market price of closed-end funds is determined by supply and demand and not by net-asset value (NAV), as is the case in open-end funds. Usually closed mutual funds trade at discounts to their underlying asset value. </span><br />
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<strong><span style="font-family: Arial, Helvetica, sans-serif;">>>Distinct Features of Closed-end Funds</span></strong><br />
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<li><span style="font-family: Arial, Helvetica, sans-serif;">These funds are closed to new capital after they begin operating </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Closed-end funds trade on stock exchanges rather than being redeemed directly by the fund </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Unlike open-end funds, the closed-end funds can be traded during the market day at any time. Open-end funds are generally traded at the closing price at the end of the market day. </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Closed-end funds are usually traded at a premiuim or discount whereas open-end funds are traded at NAV.</span></li>
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<b><span style="font-family: Arial, Helvetica, sans-serif;">>>Advantages of Closed-end Funds</span></b></div>
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<li><span style="font-family: Arial, Helvetica, sans-serif;">Closed-end funds don't have to worry about the redemption of shares, hence they tend to keep less cash in their portfolios and cam invest more capital in the market. Therefore, they have the potential to generate greater returns as compared to open-end funds. </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">In case of market panic and mass-selling by investors, open-end funds need to raise money for redemptions. To cope with the liquidity concerns, the manager of an open-ended fund may be forced to sell stocks he would rather keep, and keep stocks he would rather sell. In such as scenario the quality of the portfolio may be affected.</span></li>
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Anonymousnoreply@blogger.com0tag:blogger.com,1999:blog-8102870735351064242.post-82604612629284019372012-04-03T01:31:00.000-07:002012-10-27T08:00:29.330-07:00Reverse Merger<div dir="ltr" style="text-align: left;" trbidi="on">
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<strong><span style="font-family: 'Trebuchet MS', sans-serif;">Reverse Merger :</span></strong></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;">An act where a private company purchases a publicly traded company and shifts its management into the latter. It also normally involves renaming the publicly traded company. This allows private companies to become publicly traded while avoiding the regulatory and financial requirements associated with an IPO. </span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;">In order for a reverse merger to happen smoothly, the publicly traded company is usually a shell corporation, that is, one with only an organizational structure and little or no activity. The two businesses can then merge the private company's product(s) with the public company's structure. It also makes initial trading less dependent on market conditions, a key risk in IPOs. However, it is important to note that a reverse merger only provides the private company with more liquidity if there is a real market interest in it.</span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;">A <strong>reverse merger</strong> is a strategy where a private company purchases control of a public shell company and then they do a merger with the private company. With a reverse merger the private company shareholders receive most of the shares in the public company and control of the board. A reverse merger is a very fast way to go public with the time table only being a couple of weeks. The reason a reverse merger is so quick is the public shell company already went through all the paper work and reviews in order to become public. </span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;"><strong>Reverse Merger Analysis </strong>:</span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;"><strong>Reverse merger</strong> allows your private company to go public. </span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;">Reverse merger financial transactions are becoming increasingly popular and accepted. It is an alternative means for private companies to go public. The public shell is a vital aspect of a reverse merger transaction. A public shell is a publicly listed company with no assets or liabilities. It gets the name "shell" because the only thing remaining from the current company is its corporate shell structure. When a private company merges into this entity it becomes a shell.</span></div>
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<strong><span style="font-family: 'Trebuchet MS', sans-serif;">Advantages :</span></strong></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;">There are several benefits to a reverse merger when compared to an Initial Public Offering (IPO). You will often receive a higher value for your company and the company won't have to have an underwriter. Another few benefits are that it is much cheaper and less time consuming to go public this way. Also with a reverse merger the ownership control will not be as diluted as with a regular public offering.</span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;">More businesses qualify for a reverse merger because a long and stable history of income is not required to qualify. The lack of an earning history will not keep a privately-held company from going public this route.</span></div>
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<span style="font-family: 'Trebuchet MS', sans-serif;">The benefits to <strong>reverse mergers</strong> is that you can demand a higher stock offering for the company stock, going public at a lesser cost and less dilution then an initial public offering. With the reverse merger you are less susceptible to the market. When going public the benefits are great when trying to raise capital. With the company now being public the stock is liquid and able to be uses for financing. Your company will now have the ability to acquire other companies using stock. Being public allows the company to offer stock incentive plans to keep employees.</span></div>
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Anonymousnoreply@blogger.com0