BASIC FINANCIAL STATEMENTS - lowest point in their annual...

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BASIC FINANCIAL STATEMENTS (F/S) The Balance Sheet (B/S), Income Statement (I/S), Statement of Retained Earnings, and Statement of Cash Flows F/S summarize business activities quantitatively for an economic unit. They should be fairly presented and should contain adequately disclosure. Fairly presented: the amounts on F/S are not materially misstated. Adequate disclosure: F/S should be prepared following Generally Accepted Accounting Principles (GAAP). Frequency of reporting: quarterly or annual. Fiscal year end: most companies use a natural business year end, which occurs at the
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Unformatted text preview: lowest point in their annual business cycle. Importance of headings: 1) The name of the entity Separate entity assumption: the business entity itself, not the business owners, is viewed as owning the economic resources it uses and as owing its debts. One of the owners of Maxidrive bought a car for $15,000. He intended to keep the car for his own use. Should the car be recorded under the subtitle “Plant and Equipment? 2) The title of the statement 3) The specific date of the statement 4) Unit of measure...
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