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...
What is the difference between Faithful representation and Fair presentation?
IASB framework provides conceptual guidance regarding preparation and presentation of financial statements whereas IAS 1 sets out the principles and rules for preparation and presentation of financial statements. So the difference between these two...
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...
What are the fundamental principles for the preparation and presentation of financial statements?
Although the accounting treatments and provisions regarding presentations of different important transactions in the financial statements is dealt separate accounting standards. However, in the absence of any specific guidance, provisions of IASB Framework and...
What is Grouping and Marshalling in financial statements?
While preparing financial statements, especially Statement of Financial Position (SoFP) also, known as balance sheet, two presentation concepts are applied which are termed as Grouping and Marshalling.
Grouping means presenting similar items together as...
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 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...