Category Archives: Financial Accounting

Leases

A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. FLOWCHART TO IDENTIFY OPERATING OR FINANCE LEASE: CRITERIA : Operating Lease Analysis in point of view of Lessor and … Continue reading

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Cash & Cash Equivalents

PAS 7 – Statement of Cash flows Cash – most liquid assets, cash on hand and demand deposits unrestricted. Cash Equivalents – Short term highly liquid investments readily convertible to cash. *Presented as one line item in the balance sheet. … Continue reading

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Goodwill

Determination of Goodwill: Specific Attributes Approach  specific attributes identified  and valued accordingly such as highly advantageous strategic locations,superior management team, outstanding sales organization and unusually good reputation. Indirect Valuation goodwill is the difference between the purchase price and fair  value … Continue reading

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Classification of Financial Liabilities

PAS 39 Recognizes two classes of  Financial Liabilities; Financial Liabilities at FV through Profit & Loss Other Liabilities at Amortized Costs using the effective interest method  ex. Accounts Payable, Notes Payable, Debt Instruments and Deposits from Customers. Financial Liabilities Measurement … Continue reading

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Adjusting Entries

Typical adjusting entries: Accrual of Income revenues earned but not yet collected. 2. Accrual of expense    expenses that have been incurred but are not yet recorded. 3.  Prepayments 2 methods of recording: a. Asset b. Expense **To determine the … Continue reading

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Underlying Assumptions

Accrual Accounting recognizes transactions and other events of reporting entity in the periods in which those effects occur, even if the resulting cash receipts and payments occur in different periods. Going Concern is the assumption that that the enterprise is … Continue reading

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Objective of Financial Statements

The objective of Financial Statements is to provide information about the financial position, performance, changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Purposes: Meet common needs of most … Continue reading

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