What is Window Dressing? Window dressing is actions taken to improve the appearance of a company’s financial statements. Window dressing is particularly common when a business has a large number of shareholders, so that management can give the appearance of a well-run company to investors who probably do not have much day-to-day contact with the …
Sales to Related Parties Sale to fictitious entities Prepone booking of sales Recording Sales gross of massive discounts, and recording the discount as expense Sales done to uninterested parties asking them to do sales returns after the cut-off Favorite
Let’s assume three months, the goods were purchased in January of rupees 5 and February of rupees 10, in March it was all sold. Suppose we are following FIFO and there is an inflationary environment so we first sold the stock of rupees 5, and then of rupees 10, and so we can conclude that …
Cost of Inventory includes:The costs of purchase of inventories include: 1. Cost of purchase 2. Cost of conversion 3. Other cost to bring the inventory to the present location and condition Cost of Purchase: a) the purchase price, b) import duties and other taxes (other than those subsequently recoverable by the entity from the taxing …
Treatment in Final accounts: (i) Loss of goods due to fire, the theft or accident is known as an abnormal loss of goods. If such goods were insured by the firm, then an insurance claim may be received in full or part from the insurance company. Effect of this adjustment on final accounts will be …
As per 2(76) of Companies Act: a. a director or his relative; b. a key managerial personnel or his relative; c. a firm, in which a director, manager or his relative is a partner; d. a private company in which a director or manager or his relative is a member or director; e. a public …
What is related party as per various laws? – Companies Act, Ind AS, GST, Income Tax Read More »
An operating segment is a component of an entity: (a) that engages in business activities from which it may earn revenues and incur expenses (b) whose operating results are regularly reviewed by the entity’s chief operating decision maker (CODM) to make decisions about resources to be allocated to the segment and assess its performance; and …
Ind AS 110 defines Non Controlling Interest (earlier called Minority Interest) – NCI is Equity in a subsidiary not attributable, directly or indirectly, to a parent. Minority Interest also referred to as non-controlling interest (NCI), is the share of ownership in a subsidiary’s equity that is not owned or controlled by the parent corporation. Favorite
As per Ind AS 37, a provision is a liability of uncertain timing or amount. A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. As per Ind AS 37, A contingent liability …
As per Ind AS 108, Identification is based on 3 criteria. That is any operating segment should have 3 characteristics. Component of entity for which discrete financial information is available. (Income, expense, assets, liability) Component of entity whose performance is evaluated and reviewed by the Chief Operating Decision Maker (CODM) for the purpose of allocation …
As per IND AS 12, deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. The criteria for recognising deferred tax assets arising from the carry forward of unused tax losses and tax …
What are the DTA creation criteria as per Ind AS and how they are different from AS? Read More »
The notes shall: (a) present information about the basis of preparation of the financial statements and the specific accounting policies used in accordance with paragraphs 117–124; (b) disclose the information required by Ind ASs that is not presented elsewhere in the financial statements; and (c) provide information that is not presented elsewhere in the financial …
What are the disclosure requirements of Disclosure note 1 of financial statements? Read More »
Ensure the accuracy of the data entry process, which involves journal entries of financial transactions and the posting of journal entries to the ledger which can be done by Automated data entry process, cross-checking the first data entries and assimilating a suite of technology-based and manual data entry techniques The next step towards the accuracy …
How do you ensure completeness and accuracy of financial statements? Read More »
Matching concept states that expenses that are incurred in an accounting period should be matching with the revenue earned during that period. Thus, all expenses for that accounting period whether or not paid during that year and all revenue whether earned or not during the period should be considered to calculate profit or loss. Hence, …
Deferred tax asset When profits as per tax laws is more than profits as per books of accounts, A deferred tax asset is required to be created. Deferred Tax Asset journal entry Deferred Tax Asset A/C……. Dr To Profit & Loss A/C………. It is shown under the head of Non Current Assets in the balance …
Golden Rules of Accounting: 1 Debit The Receiver, Credit The Giver 2 Debit What Comes In, Credit What Goes Out 3 Debit All Expenses And Losses, Credit All Incomes And Gains Different types of Accounts: ❖ Personal: Personal Accounts are the ones that are related with individuals, companies, firms, group of associations etc. Eg Veer’s …
● A cash flow statement (CFS) is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company. ● The CFS measures how well a company manages its cash position, meaning how well the company generates cash. ● The CFS complements the balance sheet and the income statement. ● …
What is CFS? Components of CFS? What is the treatment of depreciation in CFS? Read More »
For Consolidation of company A and Company B we should check the relationship among the companies such as:- a. If company A holds more than 50% shares in company B, then Holding subsidiary relationship is established. b. If company A holds more than 20% shares in company B, then company A is an Associate of …
Bad Debts Bad Debts amount to that portion of the debts which are either irrecoverable or whose probability of recovery is very rare. Bad Debt Account (Debit), Debtor’s Account (Credit) Provision For Doubtful Debts Provision for bad debts is the estimated percentage of total doubtful debt that needs to be written off during the next …
Journal Entries and Differences between Bad Debts and Provision for doubtful debts Read More »
Contingencies A contingency reserve is retained earnings that have been set aside to guard against possible future losses. A contingency reserve is needed in situations where a business occasionally suffers significant losses, and needs reserves to offset those losses. Reserves Reserves are part of profits or gain that has been allotted for a specific purpose. …
Dividends are payments a company makes to share profits with its stockholders. They’re paid on a regular basis, and they are one of the ways investors earn a return from investing in stock. On Declaration : Retained Earnings…Dr To Dividend payable… Cr On Payment: Dividend Payable…Dr To Bank…Cr The entity may appropriate proposed dividend to …
Provision Provision liability reduces an asset’s value because of a present obligation arising out of a past event The event which can result in a provisional liability may or may not occur. The estimated amount of the provisional liability is not certain Any increase or decrease in provision liability gets recorded in the Profit and …
Journal Entries and Differences between Provision & Contingent Liability Read More »
Accrued Expenses Accrued Expenses is a term used in accounting where the expense is recorded in the books before it is paid for. Expenses are periodic and are listed on the balance sheet as Accrued Expenses as current liability in balance sheet such as Rent, wages, bank loan interest where payments are made monthly Interest …
Journal Entries and Differences between Accrued Payable & Accrued Expenses Read More »
Internal Controls are the policies and procedures that a company implements to ensure efficiency of business operations, reliability of financial reporting, compliance with laws & regulations, safeguarding of assets and prevention of frauds. Objectives of Internal Control A. Transactions are executed in accordance with management’s general or specific authorization; B. all transactions are promptly recorded …
Procedures are the systems that are set in place to meet the established standards of the organization. 1. Processes are the actions performed by accounting personnel that are not controls. Controls, on the other hand, are the actions that ensure safety and accuracy. 2. A process is what is being done while Controls ensure accuracy …
What are controls? How are they different from Procedures? Read More »
SA-570 deals with the auditor’s responsibilities in the audit of financial statements relating to going concern and the implications for the auditor’s report. Under the going concern basis of accounting, you are required to prepare the financial statements on the assumption that: i) the entity is a going concern; and ii) the entity will continue …
If the financial statements have been prepared using the going concern basis of accounting but, in the auditor’s judgment, management’s use of the going concern basis of accounting in the preparation of the financial statements is inappropriate, the auditor shall express an adverse opinion. If adequate disclosure about the material uncertainty is made in the …
What is the reporting requirement of auditor regarding going concern Read More »
The auditor’s responsibilities are to obtain sufficient appropriate audit evidence regarding, and conclude on, the appropriateness of management’s use of the going concern basis of accounting in the preparation of the financial statements, and to conclude, based on the audit evidence obtained, whether a material uncertainty exists about the entity’s ability to continue as a …
What is the responsibilities of the auditor regarding going concern? Read More »
As per SA 570, under the going concern basis of accounting, the financial statements are prepared on the assumption that the entity is a going concern and will continue its operations for the foreseeable future. Favorite
DEFINITION OF ASSERTION: It refers to the representations by management, explicit or otherwise, that are embodied in the financial statements, as used by the auditor to consider the different types of potential misstatements that may occur. In preparing financial statements, Company’s management makes implicit or explicit claims (i.e. assertions) regarding: A. Completeness; B. Existence/ occurrence; …
As per IND AS 115, the transaction price i.e. ₹1,20,000 will be divided in the proportion of relative standalone prices. ₹120,000 will be divided in proportion of 100,000: 50,000 Price of scooter = 80,000 Price of general maintenance = 40,000 REVENUE RECOGNITION CRITERIA SCOOTER – ₹80,000 for the scooter will be recognised immediately on the …
This is one of the most commonly asked questions of all time, and irrespective of domain. It is as important as the “Tell me something about yourself question”. You must use all technical terms prescribed here and answer in the correct order 1. Identify the contract with the customer- • A contract is an agreement …
What is the 5 step model of recognizing Revenue as per IND AS 115? Read More »
Goodwill arises when a company acquires another entire business. The amount of goodwill is the purchase consideration of the business minus the fair market value of the net assets that can be identified, and the liabilities obtained in the purchase. Goodwill does not mean any of the following – company’s brand name, solid customer base, …
Suppose you see goodwill in the balance sheet. What does it mean? Read More »
It means that the company has acquired other entities for a consideration higher than Fair Market Value of Net Assets. Goodwill does not measure synergy, it measures how much I overpaid. So I will have to go into the specifics to know whether my Goodwill is justified. Goodwill ends up being impaired very frequently so …
An operating lease is treated like renting – payments are considered operational expenses and the asset being leased stays off the balance sheet. At the end of the operational lease the asset is returned to the lessor. In contrast, a financial lease or capital lease is more like a loan; the asset is treated as …
Difference between operating lease and financial lease? Read More »
Goodwill is an intangible asset that arises because of the acquisition of one company by another for a premium value. It is thought to represent the value of a company’s brand name, solid customer base, good customer relations, good employee relations and any patents or proprietary technology represent goodwill (even though this is not true). …
