How can we change the Depreciation method?
Most of the non-current assets held by the entities require depreciation because of use devaluation as a result of use of the asset in business operations or other factors. Many different depreciation methods can be used by the entities to record the effect of devaluation. However, IAS 16 Property, Plant and Equipment requires that: In […]
What are the Elements of Financial Statements?
The main purpose of financial statements is to provide financial information to the users to assist them in their economic decisions. The financial statements basically present the financial information in such form that it is not only understandable but also useable. That is why financial statements present the financial effects of different business events that […]
What is FISH inventory method?
FISH is the acronym for First-in, Still-here and is basically an alternative name for Last-in, First-out (LIFO) method. Usually authors and article writers come up with novel terms sometimes to make things even more understandable or sometimes just to make fun. So FISH terminology for LIFO system might just be the similar kind of case. […]
What is the recognition criteria of equity?
Framework for Preparation and Presentation of Financial Statements (Framework) issued by International Accounting Standards Board (IASB) is one of the important documents. Many of the basic concepts that also form the very foundation of International Accounting Standards (IASs) have been discussed in it and provides a framework for development of accounting standards as well. Although […]
Why residual value (salvage value) is not allocated to the useful life of a depreciable asset?
Scrap value or salvage value or residual value is the value which we expect to receive by selling an asset at the end of its useful life. So basically it is the monetary value of the economic benefits that will be recovered from the asset by selling the asset and not through use of the […]
What are the important Qualitative characteristics of Financial Statements?
As we understand that different users require financial information for assistance in their economic decisions. Entities publish financial statements so that users can get their information needs fulfilled. The dependence of users’ economic decision on financial statements is crucial and if the financial information is not accurate or is not true and fair then users […]
What is the objective of Financial Statements?
The basic objective of any financial statement is to fulfill information needs of the intended users. However, there are different kinds of financial statements for different purposes. Broadly we can divide the financial statements in two different types: General Purpose Financial Statements Special Purpose Financial Statements As said earlier that the basic objective of every […]
Why Financial Statements are prepared on Accrual basis?
Financial Statements assist internal and external users by providing them financial information which they in making economic decisions. As their decisions are based on financial information underlying financial statements therefore, decision making process depends heavily on the relevance and reliability of financial statements which in simple words mean that if financial statements are not reporting […]
What are the Fundamental accounting Assumptions underlying Financial Statements?
Fundamental assumptions, basic assumptions or fundamental accounting assumptions mean the accounting concepts that have been considered and followed while recording financial information. As information needs are different from person to person, entity to entity and situation to situation thus such assumptions vary. But remember one thing fundamental accounting assumptions DOES NOT mean the rules that […]
What is the purpose of Statement of changes in equity?
Many students find it confusing that if we already have two financial statements, one covering the financial position of the business and the other telling about the financial performance then why do we need yet another statement with the name of Statement of Changes in Equity? And more interestingly, many think that its just a […]
