There are two basic financial statements—viz. Income Statement and Balance Sheet. An income statement shows the net results of the business operations during an accounting period. A balance sheet is a statement of assets and liabilities indicating the financial position of an enterprise at a given date.Meaning and purpose of comparative financial statementsComparative financial statements […]

A cash flow statement can be defined as “a statement which summarises sources of cash inflows and uses of cash outflows of a firm during a particular period of time, say a month or a year.” In nutshell, we can say that a cash flow statement shows the sources of cash receipts and the purposes

(on working capital basis) In the words of R. N. Anthony ‘Funds flow statement is a statement prepared to indicate the increases in the cash resources and the utilisation of such resources of business during the accounting period.’ Thus, funds flow statement is a report of financial operation of a business undertaking. It clearly indicates

The final account of a company consists of (a) Balance Sheet disclosing the financial position at the end of financial year, and (b) Profit & Loss Appropriation Account (or Income & Expenditure Account in the case of a company carrying on business not for profit) disclosing the result of operations of the company for the

Redemption of debentures means discharge of liability on account of debentures by making repayment to debenture holders. The method of redeeming debentures is decided at the time of issue. The following methods are adopted for redemption of debentures:Redemption of Debentures after a Fixed Period : According to this method, the whole amount of debentures is

A debenture is an instrument of acknowledgement of debt under the common seal of a company. It contains contract for the repayment of the principal sum at a specified date and for the payment of interest at a fixed rate per cent until the principal sum is repaid. Repayment of interest is usually half-yearly.The Comapnies

The word ‘company’ has not been clearly defined in the Company Act, 1956. According to the Act, all those companies which have been established under old or new company act, are included in it.According to Lord Justice Lindley, ‘‘It is an association of persons who contribute money or money’s worth to common stock and employ

Dissolution of firm means closure of business. As a result all the liabilities of the firm are paid off by disposing off all the assets of the firm and if there is cash balance, it is used to pay off the capital of the partners. It is mentioned in the ‘Indian Partnership Act, 1932, section

According to the Partnership Act 1932 Section 32 (i), a partner can retire under the following circumstances :(i) When a partner wants to retire as per the agreement.(ii) When other partner or partners have no objection on his/herretirement.(iii) When the partnership is at the sweet will and a partner gives a written notice to retire.A

When two or more persons enter into an agreement for setting up a business, running it, and sharing its profits and losses, it is called partnership. The persons who have entered into a partnership with one another are called individually ‘partners’, and collectively a ‘firm’.Definition of partnershipThe Indian Partnership Act, 1932, defines partnership as follows

According to Carter—“Single entry system is a method or a variety of methods, employed for the recording of transactions, which ignore the two-fold aspects and consequently fails to provide the businessman with the information necessary for him to be able to ascertain the position. Kohler defines it as system of book-keeping in which, as a

The statements which report the profitability and the financial position of the business at the end of the year are known as financial statements.In the words of John N. Myer, ‘The financial statements provide a summary of the account of the assets, liabilities and capital as on a certain date and the income statement showing

In business, a large number of transactions are made on credit basis. In case of credit sale of goods, buyer promises to make payment after a certain period. Under the circumstances, the seller likes to get a written undertaking from the purchaser to get the payment after a certain period. For this, the seller prepares

The term ‘provision’ means an amount, which is written off, or retained, by way of providing for depreciation, renewals, diminution in the value of assets; or retained by way of providing for any unknown future liability of which the amount cannot be determined with reasonable accuracy.Provision is a charge against the profit of the year

Depreciation may be described as a permanent, continuing and gradual shrinkage in the book value of fixed assets. It is the cost of assets consumed in business.DefinitionAccording to accounting standard VI, “Depreciation is a measure of the wearing out, consumption or other loss of value of a depreciable asset arising from use, effusion of time