In this instance the hard currency flow for the Brandywine place attention is termed as the influxs from the operations and the activities of the concern. Cash flow is the motion of hard currency in and out of the concern in a certain given period due to its funding, runing or puting activities. It is hence tantamount to state that the hard currency flow from the operating activities of the concern is 2400000.
Question 3
The Generally Accepted Accounting Principles normally referred to as GAAP is a model within which the fiscal accounting should be practiced. GAAP includes the rules, the conventions and regulations and ordinances for the fiscal comptrollers. In this instance the application of the GAAP requires consistence ( the rule of consistence ) of the method of the ciphering depreciation from one period to the other. It nevertheless allows for the alteration of the methods but once more the new method adopted should be followed. Therefore if Brandywine doubles the depreciation the undermentioned alterations will take topographic point.
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The net income will be $ 1800000
The entire net income border will be 1800/12000 *100 = 15 %
The hard currency flow of the concern is non affected by depreciation. If for any ground depreciation had been deducted from as disbursals it should be added back so as to get at the right hard currency flow figure.
Question Four
The hard currency accounting and the accrual accounting are both methods of keeping books of histories. The chief difference that occurs between the two methods is the timing difference on when to recognition or debit your histories. In the hard currency accounting footing, income is non counted until the twenty-four hours it will really be received. The disbursals histories are non debited until that clip that the hard currency will really be paid out.
However this method contradicts the gross acknowledgment rule which requires that gross should be recognized when it is earned and non when it is really received. The hard currency accounting recognizes gross when it is received therefore the incompatibility with the rule. The hard currency accounting method is besides inconsistent with the fiting rule. The rule states that grosss should be matched with the disbursals that are used to gain them within a specified period of clip. The hard currency accounting method does non fit the grosss with the disbursals because some grosss particularly for recognition gross revenues received in a different period are debited in that period therefore the incompatibility. This method has an advantage that it gives a clear image of the existent sum of hard currency the concern clasp. However it does non give a true image of the long-run profitableness of the concern.
The accrual accounting is a method where the gross is debited in the period when realized irrespective of the period when it will be received. This method is consistent with the gross acknowledgment rule which requires that the grosss should be matched with the disbursals incurred to recognize that gross. Any gross that is non received or any disbursals that is non paid in the period is termed as accumulated gross or disbursal. The accrual accounting is besides consistency with the fiting rule because all the grosss and disbursals are entered in the books of history in belonging to the period which they were realized and non when they are received or paid. The accrual accounting method provides a professional position of the accounting pattern due to observance of all rules and convention. Consequently, it may do one believe that the concern posses a batch of money while in the existent sense there is really small.
Question Five
Both the net income and non net income concern have the equity subdivision in their fiscal statement i.e. balance sheet. The difference is merely brought by the contents of the equity of the two concerns. By and large the equity subdivision of the net income devising organisation will incorporate investing which the concern has used to get some net incomes. This will include the paid in capital embracing the stock issued at par and the paid in capital i.e. the preferable and the common stock. The net income devising concern will besides incorporate the maintained earning and any involvement from the minority shareholders. If there is any exchequer stock it should besides be included in the equity subdivision but in this instance it should be deducted.
On the other manus the non net income devising concern has a different content of the equity subdivision. In a nut shell the equity subdivision of the non net income concern does non incorporate net income giving activities like the portions in the stock exchange. Generally the chief content of the non net income concern equity subdivision is the net assets of the concern. The net assets will be the entire assets minus the liabilities. More frequently than non they are financed by the givers who stipulate whether the equity should be restricted or unrestricted or even temporarily unrestricted. On a broader non the equity for the non net income concern can be contributions which can ne’er be so for the net income devising concern.
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