Adequate disclosure in accounting practices mandates that all readers of a financial statement have access to relevant data that would be believed essential to understanding a company's financial position. Adequate disclosure requires that key facts are included within the financial statement to help investors and creditors adequately assess the financial situation of a particular company. Example Details of contingent liabilities, contingent assets, legal proceedings, etc. are relevant to the decision making of users and hence need to be disclosed. Details of property, plant and equipment cannot be presented on the face of the balance sheet, but a detailed schedule outlining movement in cost and accumulated depreciation should be presented in the
Business level strategies focus on single level operation of business. • Corporate level strategies: These involve use of many strategies. It includes diversification of business. Diversification occurs when a company moves from a single operation to multiple operations of business. There are two types of diversification namely, related and unrelated.
• The individual assets are expressed as a percentage of total assets i.e. 100 & different liabilities are calculated in relation to total liabilities. For example, if the total assets are RS 10 lakhs and the value of inventory is RS 1,00,000 then inventory will be 10% of total assets 10,000*100 1,00,000 (b) Common size income statement: The items in income statement can be shown as percentages of sales to show the relations of each item to sales. 3) Trend Analysis: The trend analysis is a technique of studying several financial statements over a series of years. In this analysis trend percentages are calculated for each item by taking the figure of that item for the base year taken as RS 100.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (G.A.A.P) GAAP is an international convention of good accounting practices. It is based on the following core principles. In certain instances particular types of accountants that deviate from these principles can be held liable. The Business Entity Concept:- The business entity concept provides that the accounting for a business or organization be kept separate from the personal affairs of its owner, or from any other business or organization. This means that the owner of a business should not place any personal assets on the business balance sheet.
Entity principle: This principle states that the business and the owner of the business are two separate entities and the transactions of the two individuals should be kept separate. For example if the owner of the business has a car which used as his personal vehicle then it should not be recorded in the books of the business. Similarly if there is a loss in the business then owner’s personals assets should not be used in recovering those losses. 2. Cost principle: This principle of GAAP states that all the assets of the company should be recorded at the purchase price i.e historical cost.
Under this type of analysis, a number of ratios used for measuring the meaningful quantitative relationship between the items of financial statements during the particular period. This type of analysis is useful in comparing the performance, efficiency, and profitability of several companies in the same group or divisions in the same company. In order to avoid the limitations of Comparative Statement, this type of analysis is designed. Under this method, financial statements are analyzed to measure the relationship of various figures with some common base. Accordingly, while preparing the Common Size income statement, total sales is taken as a common base and other items are expressed as a percentage of sales.
For example, we cannot determine whether the company have good or bad employers and employees by looking at the accounts book or statement of financial positions. (b) (a) Dual aspect concept Short notes: Dual aspect is the fundamental or basic principle of accounting. It provides the very basis to record the business transactions into the account books. This concept states that every business transactions has a dual or two-fold effect. Therefore, the business transactions should be recorded at both sides.
Financial Ratio A financial ratio or accounting ratio is a relative magnitude of two chose numerical values taken from an enterprise 's financial statements. Regularly utilized as a part of accounting, there are many standard ratios used to attempt to assess the general money related state of an enterprise or other association. Money related proportions might be used by chiefs inside a firm, by present and potential investors (ratios) of a firm, and by a company 's loan bosses.Financial analysts use financial ratios to think about the qualities and shortcomings in different companies.  If shares in an organization are exchanged a financial market, the market price of the offers is utilized as a part of certain financial ratios. Ratios
Partnership Partnership is a type of business entity in which a single business includes two or more persons share ownership or we can say it is an association that compromises of two or more persons. Further, below are the essential characteristics of a partnership firm: • Number of Partner: The partnership involves business by a group of individuals. There must be at least two persons or more to start a partnership. Each partner in the business share equal liability towards operations and affairs of the business. • Agreement: Usually, each partner contributes to all characteristics of the business that are income, assets or effort.
These taxes include income taxes which are levied upon every business of every industry and are based on the structure of the entity, VAT wherein 12% must be collected on the firm and also percentage tax which is computed as a percentage of the sales. Some policies of the local government could affect the industry. This includes Republic Act No. 7160 also known as the "Local Government Cod of !991 wherein local governments could grant tax exemptions, incentives or reliefs to a business if it is necessary. This RA could affect the business in terms of tax of the firm.New start up business can be excluded from giving a minimum wage to their employees and would only last for a year.