Examples of accounting irregularity in the following topics:
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- Accounting discrepancies are unintentional mistakes in the delivery of financial statements.
- Nobody's perfect, including accountants.
- Accounting errors that are not intentional are described as discrepancies (as opposed to an accounting irregularity, which is distinguished from a discrepancy by an intention to defraud).
- Taking into account bank reconciliation when viewing the amount shown in a current account and the amount that should be shown is an occasionally cause of temporary discrepancy.
- Modern accounting is largely a software endeavor.
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- Pro forma accounting is a statement of the company's financial activities while excluding "unusual and nonrecurring transactions" when stating how much money the company actually made.
- Expenses often excluded from pro forma results include company restructuring costs, a decline in the value of the company's investments, or other accounting charges, such as adjusting the current balance sheet to fix faulty accounting practices in previous years.
- Depreciation / Amortization - the charge with respect to fixed assets / intangible assets that have been capitalised on the balance sheet for a specific (accounting) period.
- Irregular items - these are reported separately because this way users can better predict future cash flows - irregular items most likely will not recur.
- Discontinued operations is the most common type of irregular items.
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- This indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as "Net Profit" or the "bottom line").
- Depreciation/Amortization - the charge with respect to fixed assets/intangible assets that have been capitalized on the balance sheet for a specific (accounting) period.
- Irregular items - are reported separately because this way users can better predict future cash flows - irregular items most likely will not recur.
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- The key is to take each approach into account while formulating an overall opinion of the stock.
- Numbers are usually reported as a GAAP EPS number (which means it is computed using mutually agreed upon accounting rules) and a Pro Forma EPS figure (income is adjusted to exclude any one time items as well as some non-cash items like amortization of goodwill or stock option expenses).
- It is better than just looking at a P/E because it takes three factors into account: the price, earnings, and earnings growth rates.
- However, because of very common irregularities in balance sheets (due to things like goodwill, write-offs, discontinuations, etc. ) this ratio is not always a good indicator of the company's potential.
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- Methods and lives may be specified in accounting and/or tax rules in a country.
- Amortization (or amortisation) is the process of decreasing or accounting for an amount over a period.
- Discontinued operations are the most common type of irregular items.
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- Net income (the "bottom line") is the result after all revenues and expenses have been accounted for.
- Depreciation and amortization: charges with respect to fixed assets (depreciation) and intangible assets (amortization) that have been capitalized on the balance sheet for a specific accounting period.
- Irregular items are reported separately so that users can better predict future cash flows.
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- There may be equal increases to both accounts, depending on what kind of accounts they are.
- In short, a credit to asset accounts will cause an increase in the balance sheet accounts.
- A debit to asset accounts will result in a decrease in the balance sheet accounts.
- A credit to liability or equity accounts will result in a decrease in the balance sheet accounts.
- A debit to liability or equity accounts will result in an increase in the balance sheet accounts.
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- The accounts receivable departments use the sales ledger, which normally records:
- Companies have two methods available to them for measuring the net value of accounts receivable, which is generally computed by subtracting the balance of an allowance account from the accounts receivable account.
- The entry would consist of debiting a bad debt expense account and crediting the respective accounts receivable in the sales ledger.
- Under accrual accounting, a firm can recognize revenue when it has:
- This chart lays out methods for accruing revenue and expenses in accounting.
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- Finance, economics, and accounting are business subjects with many similarities and differences.
- Accounting focuses on communicating a businesses' financial information.
- If accounting is called the language of business, then the financial statements that accountants prepare are the words .
- Finance, economics, and accounting overlap in a lot of areas.
- There are few strong delineators between finance, economics and accounting.
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- Modifying inputs such as accounts receivable, inventory, and accounts payable will significantly influence forecasting and business operations.
- The inputs of accounts receivable, inventory, accounts payable, and other line items on financial statements provide important data for financial forecasting.
- Accounts receivable is money owed to a business by its customers and shown on its balance sheet as an asset.
- A business must not only anticipate the level of sales that will be made on credit, but it must also anticipate when payment on these accounts will occur and account for the fact that some of these credit accounts will default.
- Modifying accounts payable will drastically change the amount of cash-on-hand required for a business.