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...
What is the difference between Income Statement and Statement of Comprehensive Income?
Income Statement and Statement of Comprehensive are differentiated because IAS 1 gives two options to present the items of incomes and expenses recognized during the period.
IAS 1 para 81 allows that all the items...
What is Inventory?
Inventory is simply such asset that business has bought and holds with an intention to be sold in the normal course of the business i.e. it is the business of the entity to buy...
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...
What is the difference between revenue, income, profit, gain and return?
Every student who starts accounting and get an idea of these terms, the instinct of differentiating kicks in and he/she starts looking for the differences among these terms. Though there are sometimes minor and...
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...
Why closing inventory appears on the credit side of Trading account?
Closing stock or as it is also named as closing inventory is definitely an asset. But trading account is not the same as Inventory account. Inventory, being an asset, should have a debit balance...
What is the difference between Exceptional item and Extraordinary item?
So far International Accounting Standards (IASs) and International Financial Reporting Standards (IFRSs) have not defined such terminologies. However, apparently these terms seem to have different treatments according to accounting standards especially IAS 1 in...