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الخميس، 30 أبريل 2015

المعالجة المحاسبية لشراء الشركة لسيارات بالتقسيط والتأجير المنتهي بالتمليك

المعالجة المحاسبية لشراء الشركة لسيارات بالتقسيط والتأجير المنتهي بالتمليك 


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عند الشراء :
من المذكورين
من حـ/ الاصل(السيارات) بقيمتها كاش
من حـ/ فوائد مؤجلة
الى حـ/ الموردين (شركة عبد اللطيف جميل للسيارات)
==============================================
عند سداد القسط الشهري للمورد
من حـ/ المورد ( بقيمة القسط + الفوائد الشهرية) 
الى حـ/ النقدية
==============================================
وفي نهاية كل شهر او نهاية العام منعمل قيد اقفال فوائد مؤجلة
من حـ/ مصروفات فوائد (تقفل في قائمة الدخل )
الى حـ/ فوائد مؤجلة
---------
منقول عن قهوة المحاسبين
ا/تحسين

الأحد، 26 أبريل 2015

اوراق الدفع



بيقولك يا حاج فى حساب وسيط اسمه اوراق الدفع ... اه والله زمبقولك كده smile emoticon
الحساب ده بقا فايدته ايه ؟؟؟ 
حضرتك لما تاخد شيك وموعد استحقاقه بعد مده كبيره حطه فى الحساب ده لحد ما يجى وقت الصرف واصرفه ... 
واحد يقوم ويتشندح كده ويقولى ازاى يا عم ازاى ؟؟ انت نسيت المحاسبه ولا ايه ؟؟ انا اول ما باخد شيك بظرفه فى البنك علطووووول ..
اقولو منت فعلا شندوح .. ( شندوح عبدالعليم - الش رخيص )
هنفترض النهارده 26/4/2015 اديتشيك ب 20 الف الى مورد ... موعد صرف الشيك ده 10/5/2015 .. هتعمل ايه ؟؟
أ شندوح قالى هعمل قيد كده
20 من ح / المورد
20 الى ح / البنك.
ايون بس يا أ شندوح كده لما تيجى تعمل تسويه البنك فى شهر 4 مش هتلاقى المبلغ ده اتصرف من حسابك ... هتعمل ايه ؟؟
قالى عادى بعمل مذكره واقول ان المبلغ ده لم يصرف smile emoticon
طيب يا استاذ شندوح ايه راى حضرتك اقولك معالجه بديله ظريفه وكيوت خالص
لما بدى الشيك للمورد بقول
20 من ح / المورد
20 الى ح / اوراق الدفع .. شيك //،،÷÷×××
وبكره مش هينزل البنك اصلا وفى التسويه بتاع شهر 4 هتكون تمام
ولا هينزل البنك دفترى عندى ولا فى كشف البنك ..
و فى يوم 10/5/2015 م الراجل راح صرف الشيك .. يبقى اعدل الدنيا واقفل حساب اوراق الدفع دهوت او دهون ..
20 من ح / اوراق الدفع
20 الى ح / البنك ..
كده بقا هتظهر عدى فى كشف حسابى دفتريا واكيد فى البنك لما تيجى تعمل التسويه
طب لو الراجل مسحبش الشيك فى شهر 5 و مش ظهرت ايه الحل ؟
عادى جدااا تقفلها بعكس القيد السابق واول ما يصرف الشيك رجع القيد مره اخرى
سهله يا استاذ شندوح ؟؟؟

منقول / رفيق هاشم 

السبت، 25 أبريل 2015

Self Study CMAP1A-The Income Statement



The Income Statement

The income statement reports on the success of a company’s operations during a given period of time. The
income statement provides users with information to help them predict the amounts, timing, and uncertainty
of (prospects for) future cash flows.
The income statement is created using the accrual method of accounting as applied to historical transactions.
The income statement gives the results of operations for a period of time and is like a movie recording the
events of the business for that period of time. This attribute of the income statement is in contrast to the
balance sheet, which provides information as of one moment in time.
The accounts that are used to record revenues, expenses, gains and losses are temporary accounts. They
are closed to a permanent account (retained earnings on the balance sheet) at the end of each period
(fiscal year). Thus at the beginning of each fiscal year, the balances in the income statement accounts are
zero.
Certain types of events are classified and reported separately on the income statement. The standard
multiple-step income statement format includes the following sections:
Sales or service revenues
− Cost of goods sold (COGS)
= Gross profit
− Selling, general, and administrative expenses
= Operating income
+ Interest and dividend income
− Interest expense
+/− Non-operating gains/(losses)
= Income from continuing operations before income tax
− Provision for income taxes on continuing operations
= Income from continuing operations
+/− Gains/(losses) on operations of discontinued component (net of applicable taxes)
+/− Gains/(losses) on disposal of discontinued component (net of applicable taxes)
Income before extraordinary item
+/− Extraordinary gain/(loss)
Less: Applicable income tax
= Net Income
Note: “Income from continuing operations” on a multi-step income statement is not the same thing as
“operating income.”
Operating income includes revenues and expenses generated by the company’s core business. Operating
income does not include financial income (interest and dividend income) or financial expense (interest
expense), nor does it include non-operating gains and losses or gains and losses on discontinued
operations or extraordinary events.
Income from continuing operations, on the other hand, does include financial income and financial
expense and non-operating gains and losses in addition to revenues and expenses generated by the
company’s core business.
Income from continuing operations refers to income (loss) other than gains (losses) from discontinued
operations and extraordinary events. It is called income from continuing operations to distinguish it from
gains and losses on discontinued operations and extraordinary events.
The line “Income from continuing operations” appears on an income statement only if the firm
is reporting results of discontinued operations.
Similarly, the line “Income before extraordinary item” would appear on an income statement only if the
firm is reporting extraordinary items.
A single-step income statement may also be used. A single-step income statement has only two groupings:
revenues and expenses. Total expenses are subtracted from total revenues to determine the net income or
loss. The single-step form of income statement is simpler and eliminates potential classification problems.
Note: In addition to all of this information regarding income, information regarding Earnings per Share
(EPS) must also be disclosed on the face of the income statement.
Elements of the Income Statement
Revenues represent inflows or other enhancements to assets or settlements of liabilities8 as a result of
delivering goods or providing services that are the entity’s main or central operations. Revenues are usually
recognized when the earnings process (the provision of goods or services to the customer) is complete and an
exchange has taken place. The exchange does not need to include cash but may include a promise to pay in
the future (a receivable).
Note: The revenue recognition principle requires revenues to be recognized in the accounting period in
which the performance obligation is satisfied.
However, revenue may also be recognized under the following methods in the right circumstances:
Percentage-of-completion for long-term contracts,
Production basis for agricultural products and precious metals if they have (1) interchangeable
(fungible) units and (2) quoted prices available in an active market that can rapidly absorb the quantity held by the entity without significantly affecting the price, 9
Installment basis, used when we are not certain of the collectability of the account, and
Cost-recovery basis, a method of accounting for an installment basis sale where recognition of the
gross profit is deferred until all cost of the sales has been recovered. Used when the seller is unable
to measure the certainty of collectability.
Expenses are outflows or other using-up of assets or the incurrence of liabilities as a result of delivering
goods or providing services that are the entity’s main or central operations. Expenses are recognized
based upon one of the following three methods:
Cause and effect: the cost of a item sold is recognized as cost of goods sold when the item is sold,
Systematic and rational allocation such as depreciation, and
Immediate recognition: if an expense will not provide future benefit, it is immediately recognized.
Note: The expense recognition principle, commonly called the matching principle, states that
recognition of expenses is related to net changes in assets and the earning of revenues. Expenses should
be recognized during a period as a result of delivering or producing goods and/or performing services and
recognizing the associated revenue during that period. Thus, expenses should be recognized when the
work or product contributes to revenue. The expense recognition principle is implemented by matching
efforts (or expenses) with accomplishments (revenues).
Gains are increases in equity as a result of transactions that are not part of the company’s main or central
operations and that do not result from revenues or investments by the owners of the entity.
Losses are decreases in equity as a result of transactions that are not part of the company’s main or central
operations and that do not result from expenses or distributions made to owners of the entity.
The difference between revenues and gains and between expenses and losses depends on what the
company’s typical activities are. For example, the sale of a product as part of a company’s normal operations
constitutes revenue. However, the sale of a fixed asset is not part of the company’s regular operations, so the
excess of the amount received for the asset over its net book value is a gain, not revenue.
8 Settlement of a liability creates revenue, for example, when the company has received a deposit from a customer for an
order to be delivered in the future. The deposit is a current liability when received. When the order is fulfilled, the liability is
debited to reduce it by the amount of the deposit, and the amount of the deposit is credited to revenue.
9 Per FASB Statement of Concepts No. 5, paragraphs 84(e) and 83(a). Per paragraph 84(e): “If products or other assets
are readily realizable because they are salable at reliably determinable prices without significant effort (for example, certain
agricultural products, precious metals, and marketable securities), revenues and some gains or losses may be recognized at
completion of production or when prices of the assets change. Paragraph 83(a) describes readily realizable (convertible)
assets.” Per Paragraph 83(a): “Readily convertible assets have (i) interchangeable (fungible) units and (ii) quoted prices
available in an active market that can rapidly absorb the quantity held by the entity without significantly affecting the
price.”
Unusual Gains and Losses
Some items may need separate disclosure on the income statement in order to help users to predict amounts,
timing and uncertainty of future cash flows. Some examples of unusual gains and losses are losses on writedowns of inventory or other assets or restructuring charges.
Companies generally report unusual items in a separate section on the income statement just above Income
from Operations Before Income Taxes.
Unusual gains and losses are different from extraordinary gains and losses, covered below. Although unusual
gains and losses do not qualify to be reported as extraordinary gains and losses, the firm may want to show
them separately.
Discontinued Operations
A discontinued operation is any component of an entity that has been or will be eliminated from the
operations of the company and the company has no further significant involvement in that component after
the disposal transaction.
A discontinued operation exists whenever a company makes a decision to dispose of an identifiable part of its
business. The discontinuation can take the form of the sale of a part of the business or spinning-off part of the
company to form a new company. The discontinuation can also occur through the abandonment of the assets.
All gains or losses that are incurred by the discontinued segment are reported in the period in which the
gain or loss occurred; and this disclosure on the income statement is done net of taxes.
As soon as the company makes the decision to dispose of a component of the business, the operations
(incomes and expenses) of the component to be disposed of should be reported on one line net of tax below
income from continuing operations. When the actual disposal takes place, the gain or loss from the disposal is
also reported net of tax below income from continuing operations. The gain or loss from the actual disposal of
the component should be reported on a separate line from the gain or loss from the operations of the
discontinued component, as follows:
Income from continuing operations
Discontinued operations:
+/− Gain/(loss) on operations of discontinued component (net of applicable taxes)
+/− Gain/(loss) on disposal of discontinued component (net of applicable taxes)
Net Income
In other words, all gains and losses from the component to be discontinued should be removed from income
from continuing operations so users of the financial statements can see what income from continuing
operations is without the operations of the component to be disposed of.
Companies use the line “Income from continuing operations” on the income statement only when gains or
losses on discontinued operations occur.
Extraordinary Items
The criteria for an item to be classified as extraordinary are:
1) Unusual nature. The event or transaction should be highly abnormal and be clearly unrelated to the
ordinary and typical activities of the company.
2) Infrequency of occurrence. The event or transaction should be something the company does not
reasonably expect to recur in the foreseeable future.
Classification of an event or transaction as extraordinary should occur only rarely, for example damage from a
major casualty such as an earthquake if the company is not located in an area where earthquakes occur
frequently.
When a company has a gain or loss from an extraordinary item, its income statement has a line “Income
before extraordinary item” and the extraordinary gain or loss is reported below the line, net of applicable
income tax, as follows:
Income before income tax and extraordinary item
Income Tax
Income before extraordinary item
+/− Extraordinary gain (loss) [describe]
Less: Applicable income tax
Net Income
Intraperiod Tax Allocation
Discontinued operations and extraordinary items need to be reported on the income statement net of their
applicable taxes. That means taxes must be allocated among the various components of the income
statement. This allocation of tax is called intraperiod tax allocation (allocation within one period). The
income tax due should be allocated first to income from continuing operations. Then the remaining tax due
should be pro-rated among gains/losses from discontinued operations, extraordinary items and any other
items according to each one’s proportion of the total other income.
Noncontrolling Interest
A company may own less than 100% of the stock of another company, but it may own a large enough portion
of the other company’s stock that it has control over the other company and must consolidate the other
company’s financial results with its own financial results. In these cases, the other company is a subsidiary of
the parent company but not a wholly-owned subsidiary. The noncontrolling interest in the other company
is the portion of the equity in the subsidiary that is not owned by the parent.
Since the financial results of the parent and the subsidiary are consolidated, the net income of the
consolidated entity includes some net income that does not belong to the parent because it belongs to the
minority shareholder(s). When the parent prepares a consolidated income statement, the net income must be
allocated between the controlling interest (the parent) and the noncontrolling interest (the minority
shareholder[s]). The allocation is reported after net income on the income statement, as follows:
Consolidated net income
− Less: Net income attributable to noncontrolling interest(s)
= Net income attributable to shareowners of the parent
Use of the Income Statement
The income statement helps users of the financial statements to predict future cash flows, as follows:
It helps users to evaluate the company’s past performance and to compare it to the performance of
its competitors.
It provides a basis for predicting future performance.
It helps users to assess the risk or uncertainty of achieving future cash flows
Limitations of the Income Statement
Most of the limitations of the income statement are caused by its periodic nature. At any particular financial
statement date, buying and selling will be in process, and some transactions will be incomplete. Therefore,
net income for a period necessarily involves estimates, and these estimates affect the company’s performance
for the period.
Limitations that reduce the usefulness of the income statement for predicting amounts, timing and uncertainty
of cash flows include:
Net income is an estimate that reflects a number of assumptions.
Income numbers are affected by the accounting methods used. For example, differences in methods
of depreciation cause differences in amount of depreciation expense during each year of an asset’s
life. A lack of comparability between and among companies results from these differences in accounting methods.
Income measurement involves judgment. For example, the amount of depreciation expense recorded
during a period is dependent upon estimates regarding the useful lives of the assets being depreciated.
Items that cannot be measured reliably are not reported in the income statement. For instance,
increases in value due to brand recognition, customer service, and product quality are not reflected
in net income.
The income statement is limited to reporting events that produce reportable revenues and expenses.
Generally, revenues and gains are not recognized until they can be reliably measured and are realizable. “Reliably measured” means they can be converted into a known amount of cash or claims to
cash. “Realizable” generally means that the company has completed all of its obligations relating to
the sale of the product, and the collection of the receivable is assured beyond reasonable doubt. Delaying the recognition of revenue until it is realizable is a means of dealing with the periodic nature of
the income statement. However, some gains such as holding gains on available-for-sale securities
are realizable but are not reported on the income statement. The available-for-sale securities could
be sold immediately at the market price, but holding gains and losses on them are excluded from net
income, though they are reported in accumulated other comprehensive income in the equity section
of the balance sheet.
Comprehensive income is the total change in equity that results from all sources other than distributions to
owners and investments by owners. It is a little closer to being an economic measure of income than net
income is.
Question 3: The financial statement that provides a summary of the firm’s operations for a period of time
is the
a) income statement.
b) statement of financial position.
c) statement of shareholders’ equity.
d) statement of retained earnings.
 NEXT The Statement of Cash Flows (SCF)


Self Study CMAP1A-The Balance Sheet



                CMA Self Study 





CMA Part 1
Section A –
 External Financial Reporting Decisions...................................................... 0
The Balance Sheet

The Balance Sheet
The balance sheet, also called a statement of financial position, provides information about an entity’s
assets, liabilities and owners’ equity at a point in time. The statement shows the entity’s resource
structure—the major classes and amounts of assets—and its financing structure—the major classes and
amounts of liabilities and equity. 3 The balance sheet is a picture of what the company owns and owes at a
particular point in time (usually the end of a reporting period).
The balance sheet presents assets, liabilities, and equity in what is called the proprietary theory. The
proprietary theory means that net assets are viewed as belonging to the owner(s) or proprietor(s).
A balance sheet is not intended to show the value of a business. However, along with other financial
statements and other information, a balance sheet should provide information that will be useful to someone
who wants to make his or her own estimate of the business’s value. 4
Balance sheet accounts are permanent accounts. They are not closed out at the end of each accounting
period but rather their balances are cumulative. They keep on accumulating transactions and changing with
each transaction, year after year.
Elements of the Balance Sheet
Elements of the balance sheet include assets, liabilities, and stockholders’ (or owners’) equity.
Assets are probable future economic benefits that have been obtained or are controlled by an entity as a
result of past transactions or events. Thus, an asset is something that:
arose from a past transaction,
is presently owned by the company, and
will provide a probable future economic benefit to the company.
Note that this definition encompasses three time periods: the past, the present and the future.
Liabilities are probable future sacrifices of economic benefits due to present obligations of an entity to
transfer assets or provide services in the future, resulting from past transactions or events. Thus, a liability is
something that:
arose from a past transaction,
is presently owed by the company, and
will lead to a probable future sacrifice of economic benefits by the company.
The definition for liabilities contains the same three time periods as are contained in the definition of assets—
the past, the present and the future.
Equity is net assets, or the residual (remaining) interest in the assets of an entity after deducting its liabilities
from its assets. For a business entity, equity is the ownership interest.
Current and Noncurrent Classification of Assets and Liabilities
On the balance sheet, assets and liabilities are classified as either current or noncurrent. Current assets and
liabilities are short-term and noncurrent assets and liabilities are long-term, but the more correct terminology
for both assets and liabilities is “current” and “noncurrent.” Whether an asset or liability is classified as current
or noncurrent depends upon the time frame in which the asset or liability is expected to be settled (for
liabilities) or converted into cash (for assets).
Note: The operating cycle is the average time between the acquisition of resources (or inventory) and
the final receipt of cash from the sale of those assets.
Current Assets
Current assets are assets that will be converted into cash or sold or consumed within 12 months or within one
operating cycle if the operating cycle is longer than 12 months. Therefore, an asset that will be converted into
cash within 18 months may be classified as a current asset if the reporting company’s operating cycle is 18
months long, but an asset that will be converted into cash within less than 12 months will always be
classified as a current asset.
Current assets are perhaps the easiest of the various sections of the balance sheet to identify and include:
Cash – Coins, currency, undeposited checks, money orders and drafts, and demand deposits.
Cash equivalents – Short-term, highly liquid investments that are convertible to known amounts of
cash without a significant loss in value and have maturities of 3 months or less from the date of purchase.
Receivables – Trade accounts receivable, notes receivable, receivables from affiliates and officer and
employee receivables.
Inventories – Goods on hand and available for sale and, for a manufacturer, raw materials and workin-process.
Short-term investments maturing in less than one year – Marketable securities purchased with
temporarily idle cash that can be sold to meet current cash needs or investments maturing within
one year or the operating cycle, if longer. Marketable securities classified as trading securities are
always current assets. Marketable securities classified as available-for-sale or held-to-maturity are
current assets if the securities are considered working capital that is available for current operations.
An available-for-sale or held-to-maturity security classified as a current asset could thus have a maturity of anything up to the length of the firm’s operating cycle, if management considers it available
for current operations. Alternatively, an available-for-sale or held-to-maturity security with a maturity of less than the length of the business’s operating cycle might also be considered a non-current
asset, if management does not consider it to be available for current operations.
Prepaid expenses – Amounts paid in advance for the use of assets (such as rent) or for services to
be received at a future date. Prepaid expenses are not convertible to cash, but they are classified as
current assets because they would have required the use of current assets during the coming operating cycle if they had not been prepaid.
Noncurrent Assets
Noncurrent assets are assets that will not be converted into cash within one year or during the operating
cycle if the operating cycle is longer than one year. Noncurrent assets include:
long-term investments,
property, plant and equipment,
intangible long-term assets, and
other long-term assets such as long-term prepaid expenses, prepaid pension cost, and noncurrent
receivables.
Long-term Investments and Funds
Long-term investments and funds that management expects to hold for more than one year are included in
noncurrent assets. Examples of these noncurrent assets are:
Investments in nonconsolidated subsidiaries or affiliated companies made for the purpose of controlling or influencing the investee.
Available-for-sale and held-to-maturity securities that are not current assets. Noncurrent securities
can include stocks, bonds and long-term notes receivable. If management intends to hold them for
more than one year, they are classified as long-term investments. Many securities classified as longterm investments are readily marketable, but the company does not include them in current assets
unless it intends to convert them to cash with one year or within the operating cycle, whichever is
longer.
Funds that are restricted for noncurrent purposes, such as for the retirement of debt or to pay for
the construction of fixed assets.
The cash surrender value of a life insurance policy. The cash surrender value of a life insurance
policy is essentially the amount that the holder of the policy would get from the insurance company if
the policy were cancelled. Some firms own life insurance policies on the lives of their key employees,
and such insurance policies are assets of the corporation.
Fixed assets not currently being used in operations such as idle facilities or land held for future use
Property, Plant and Equipment (Fixed Assets)
Property, plant and equipment (PP&E) are tangible assets that are used in operations and will be used past
the end of the current period. When the fixed assets are purchased they are recorded at their cost, including
costs such as installation costs needed to bring the asset to usable condition. The cost is then expensed over
the life of the asset through depreciation.
Examples of property, plant and equipment are:
land, buildings, machinery, furniture, equipment, and vehicles,
leasehold improvements, or improvements made to leased property at the lessee’s expense,
assets that have been obtained through a capital lease, and
wasting resources such as timberland and minerals.
Except for land, a company either depreciates or depletes property, plant and equipment. Wasting resources
are depleted, while other fixed assets (other than land) are depreciated. Land is neither depreciated nor
depleted because land is not used up and does not wear out.
Intangible Assets
Intangible assets are assets that do not have a physical substance but provide benefit to the firm over a
period of time. Intangible assets may be either purchased or developed internally. However, because an asset
comes about only as a result of a prior transaction, internally-generated intangible assets are not recorded on
the balance sheet.
Examples of intangible assets are copyrights, patents, goodwill, trademarks and franchises. An intangible
asset with a limited life is amortized over its useful life. An intangible asset with an indefinite life such as
goodwill is assessed periodically for impairment.
Additional information about intangible assets is provided in the HOCK Assumed Knowledge e-Book.
Other Noncurrent Assets
Other noncurrent assets include any noncurrent asset that is not included in any other category. Examples of
other noncurrent assets are:
noncurrent receivables,
restricted cash or securities or assets in special funds,
long-term prepayments, and
deferred tax assets.
Current Liabilities
Current liabilities are obligations that will be settled through the use of current assets or by the creation of
other current liabilities.
Examples of current liabilities are:
accounts payable due to suppliers for purchase of goods and services;
trade notes payable arising from the purchase of goods and services;
dividends payable;
unearned revenues (advances and deposits received that represent obligations to supply goods
and/or services);
agency collections such as employee tax withholdings and sales taxes, where the company acts as
agent for another party (the government) and is obligated to remit the payments;
obligations that, according to their terms, are due on demand such as demand notes;
short-term (30-, 60-, 90-day) notes;
current portion of long-term debt (the portion of the principal due within the current period);
taxes payable, wages payable and other accruals, and
long-term obligations callable at the balance sheet date due to some violation by the company such
as a violation of a loan covenant. 5
Current liabilities do not include the following:
debts to be paid by funds that are in accounts classified as noncurrent, and
the portion of a short-term obligation that is intended to be refinanced by a long-term obligation. In
order to classify such a current liability as a noncurrent liability, however, the company must have
demonstrated the ability to refinance the obligation as a noncurrent liability. Having a commitment
from a bank for long-term financing of the obligation is an example of a way to demonstrate the ability to refinance it.
Noncurrent Liabilities
Noncurrent liabilities are liabilities that will not be settled within one year or the operating cycle if the
operating cycle is longer than one year.
Examples of noncurrent liabilities are:
Long-term notes or bonds payable.
The long-term portion of long-term debt and liabilities for capital leases.
Pension obligations.
Long-term deferred tax liabilities.
Obligations under warranty agreements.
Advances for long-term commitments to provide goods and services.
Long-term deferred revenue.
Most long-term debt is subject to various covenants and restrictions, requiring a great deal of disclosure in
the financial statements.
Question 1: Long-term debt should be included in the current section of the statement of financial position
if
a) it is to be converted into common stock before maturity.
b) it matures within the year and will be retired through the use of current assets.
c) management plans to refinance it within the year.
d) a bond retirement fund has been set up for use in its scheduled retirement during the next year.
(CMA Adapted)
5 A covenant is a condition or a requirement in a loan agreement or in a bond indenture. (A bond indenture is the legal,
binding contract between a bond issuer, the borrower, and the bondholders, the lenders.) Covenants may restrict the
actions of the borrower or require that they meet certain requirements such as maintaining certain financial statement
ratios. If the borrower fails to meet the requirements of the loan agreement, the loan becomes in default, just as if the
borrower had failed to make scheduled loan payments, and the full principal and any accrued interest becomes immediately
due and payable.
Equity
Equity is the remaining balance of assets after the subtraction of all liabilities. Equity is the portion of the
company’s assets owned by and owed to the owners. If the company were to be liquidated, equity represents
the amount that would theoretically be distributable to the owners.
All business enterprises have owners’ equity, but the types of accounts in owners’ equity will differ depending
on the type of the entity. This discussion focuses on corporations, so the elements of owners’ equity discussed
here are the elements of a corporation’s equity.
Owners’ equity for corporations is split into six different categories.
Capital stock, the par or stated value of the shares issued.
Additional paid-in capital, or the excess of amounts contributed by owners from the sale of shares
over and above the par or stated value of the shares issued.
Retained earnings, or profits of the company that have not been distributed as dividends.
Accumulated other comprehensive income items, or specific items that are not included in the income statement but are included in equity and do adjust the balance of equity, even though they do
not flow to equity by means of the income statement as retained earnings do.
Treasury stock, or the amount of shares repurchased (a contra-equity account that reduces equity on
the balance sheet).
Noncontrolling interest (minority interest), or a portion of the equity of subsidiaries that the reporting
entity owns but does not own wholly.
Note: When a corporation repurchases shares of its own stock from the market, the repurchased shares
are called treasury shares or treasury stock. Treasury shares purchased reduce owners’ equity,
because those shares are no longer outstanding.
Use of the Balance Sheet
Because the balance sheet provides information on assets, liabilities and stockholders’ equity, it provides a
basis for computing rates of return, evaluating the capital structure of the business, and predicting a
company’s future cash flows.
The balance sheet helps users to assess the company’s liquidity, financial flexibility, solvency and risk. 6
However, a statement of financial position can provide only a partial picture of either liquidity or financial
flexibility unless it is used in conjunction with at least a statement of cash flows. 7 The statement of financial
position can also be used in financial statement analysis to assess the company’s ability to pay its debts when
due and its ability to distribute cash to its investors to provide them an adequate rate of return.
Liquidity refers to the time expected to elapse until an asset is converted into cash or until a liability needs
to be paid. The greater a company’s liquidity is, the lower its risk of failure.
Solvency refers to the company’s ability to pay its obligations when they are due. A company with a high
level of long-term debt relative to its assets has lower solvency than a company with a lower level of longterm debt.
Financial flexibility is the ability of a business to take actions to alter the amounts and timing of its cash
flows that enable the business to respond to unexpected needs and take advantage of opportunities.
Risk refers to the unpredictability of future events, transactions and circumstances that can affect the
company’s cash flows and financial results.
6 FASB Statement of Concepts No. 5, Recognition and Measurement in Financial Statements of Business Enterprises,
paragraph 29.
7 FASB Statement of Concepts No. 5, Recognition and Measurement in Financial Statements of Business Enterprises,
paragraph 24.a
Limitations of the Balance Sheet
A balance sheet reports a company’s financial position, but it does not report the company’s value, for the
following reasons:
Many assets are not reported on the balance sheet, even though they do have value and will generate future cash flows. Examples of these assets include the company’s employees, or its human
resources, its processes and procedures, and its competitive advantages.
Values of certain assets are measured at historical cost, not market value, replacement cost, or their
value to the firm. For example, property, plant and equipment are reported on the balance sheet at
their historical cost minus accumulated depreciation, although the assets’ value in use may be significantly greater.
Judgments and estimates are used in determining many of the items reported in the balance sheet.
For example, estimates of the amount of receivables the company will collect are used to value the
accounts receivable; the expected useful life of fixed assets is used to determine the amount of depreciation; and the company’s liability for future warranty claims is estimated by projecting the
number and the cost of the future claims.
Most liabilities are valued at the present value of cash flows discounted at the rate that was current
when the liability was incurred, not at the present value of cash flows discounted at the current market interest rate. If market interest rates increase, a liability that carries a fixed interest rate that is
below market increases in its value to the company. If market rates decrease, a liability that is payable at a fixed rate that is higher than the market interest rate sustains a loss in value. Neither of
these changes in values is recognized on the balance sheet.
Fair value is increasingly being used to measure items presented on the balance sheet. Furthermore, many
items such as derivatives that previously were not reported on the balance sheet at all are now being reported
at fair value.
Question 2: A statement of financial position provides a basis for all of the following except
a) computing rates of return.
b) evaluating capital structure.
c) assessing liquidity and financial flexibility.
d) determining profitability and assessing past performance for a specific period.
(ICMA 2010)
The Income Statement NEXT                                                     

الخميس، 23 أبريل 2015

Self Study CMAP1A-Financial Statements


           

                CMA Self Study 





CMA Part 1
Section A –
 External Financial Reporting Decisions...................................................... 0
             القوائم المالية      Financial Statements  
       الميزانية العمومية  The Balance Sheet 

 قائمة الدخل The Income Statement 

  قائمة التدفقات النقدية The Statement of Cash Flows (SCF) 

قائمة الدخل الشامل  Statement of Comprehensive Income
 قائمة التغيرات في حقوق الملكية Statement of Changes in Stockholders’ Equity 

  القيود المفروضه علي القوائم Limitations of Financial Statements in GeneralRecognition, Measurement, Valuation and Disclosure ................................................ 00
 حسابات العملاء Accounts Receivable
 المخزون Inventory
 الاستثمارت Investments
الالات والمعدات Property, Plant and Equipment
Intangible and Other Assets
Valuation of Liabilities
Accounting for Income Taxes
Owners’ Equity
Revenue Recognition
Differences Between U.S. GAAP and IFRS

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Introduction to CMA Part 1
The Part 1 Exam has five sections included in the Learning Outcome Statements. The five sections and their
approximate weights on the exam are:
1) External Financial Reporting Decisions: 15%
2) Planningالتخطيط, Budgeting الموازنةand Forecasting: 30%التنبؤ
3) Performance Management: 20% تقييم الاداء 
4) Cost Management: 20% ادارة التكاليف 
5) Internal Controls: 15% الرقابه الداخلية 



Section A, External Financial Reporting Decisions, represents 15% of the exam. The information provided

through financial accounting and reporting should be useful to individuals who are using the information to

make decisions about the future direction of the business. Although knowledge of external financial reporting

is assumed, Section A covers external financial reporting from the perspective of its use in decision-making.
The differences between U.S. GAAP and IFRS are an important part of Section A.

Section B,
Planning, Budgeting and Forecasting, represents 30% of the exam and is the largest part of the
exam in terms of weight. Planning, budgeting, and forecasting are very important skills for the CMA, and this
section should be one of the areas you focus on in your preparation.

Section C,
Performance Management, is 20% of the exam. Section C covers variance analysis and
responsibility accounting as well as financial performance measures. For variances, you need to be able to
both calculate the variances and interpret the information that you get through variance analysis. In addition
to memorizing the variance formulas, you will need to be able to understand and interpret the results of each
variance calculation.

Section D,
Cost Management, is also 20% of the exam. Section D focuses on costing systems and covers a
number of methods of allocating costs and overheads. It also covers supply chain management and business
process improvement.

Section E,
Internal Controls, represents 15% of the exam. The fact that it represents “only” 15% of the exam
does not mean you can ignore it. The technicalities of internal controls are important to know, especially the
relevant laws that businesses are subject to and the related guidance that has been published. The SarbanesOxley Act has had effects that are far reaching, and you should be familiar with its requirements.



****************************************


 External Financial Reporting Decisions

Financial accounting is the process of reporting the results and effects of the financial transactions that a
business undertakes. The objective of financial reporting is to provide financial information about the entity
that is useful for decision-making. Those using the financial information to make decisions include present and potential equity investors, lenders, and other creditors who need to make decisions about providing resources to the entity. The decisions relate to buying, selling, or holding debt or equity instruments and providing credit.
In order to make these decisions, investors, lenders and other creditors need information that will help
them assess the amount of, timing of, and prospects for future net cash inflows to the entity. 1
Other users who may or may not be providing capital to the firm, such as management, employees, financial
analysts and regulators find the financial statements useful, as well.
The types of decisions that these individuals are making are numerous and varied. It is not possible for
accounting information to provide all of the necessary information that users need to make their decisions.
Users need to access information from other sources, as well, such as economic forecasts, the political
climate, and industry outlooks. 2 However, the financial statements do attempt to provide as much useful
information as possible to the users.

Financial Statements* Users of Financial Information
Published financial information must be in compliance with the established accounting guidelines because
outside users will rely on it to make a variety of decisions. These rules and standards are in place to protect
outside users by ensuring that the information is accurate and useful and can be understood by everyone.
Because so many people are using the financial information and they are using it for so many diverse
purposes, the reasons that people need the financial information are also diverse, such as to:
Make investment decisions.
Extend credit or not.
Assess areas of strength and weakness within the company.
Evaluate performance of management.
Determine whether or not the company is in compliance with regulatory requirements.
Users of financial information can be classified by various distinctions:
Direct vs. Indirect Users – Direct users are those who are directly affected by the results of a company.
Direct users include investors and potential investors, employees, management, suppliers and creditors.
Direct users are individuals who stand to lose money financially if the company has financial problems.
Indirect users are those people or groups who represent direct users. They include financial analysts and
advisors, stock markets and regulatory bodies.
Internal vs. External – Internal users make decisions within the firm whereas external users make decisions
from outside of the firm about whether or not to begin a relationship with the firm, continue a relationship
with the firm, or change their relationship to the firm

Note: Users of financial statements are assumed to have a reasonable knowledge of business and
economic activities and to be willing to study the information with reasonable diligence. This is an
important assumption because it means in the preparation of financial statements, a reasonable level of
competence on the part of users can be assumed. Someone who has a reasonable understanding of
business, accounting and economic activities should be able to read the financial information that is
presented and understand it.
The Financial Statements
The five financial statements used under U.S. GAAP are:
Balance Sheet (also called the Statement of Financial Position.
Income Statement.
Statement of Cash Flows.
Statement of Comprehensive Income.
Statement of Changes in Stockholders’ Equity.
Note: The notes to the financial statements are also considered an integral part of the financial statements
but are not an actual financial statement. The purpose of the notes is to provide informative disclosures
that are required by GAAP.
Note: A company can also prepare prospective financial statements. Prospective financial statements
are financial statements that are based on a set of assumptions and cover a future period. Whenever
prospective financial statements are prepared, the significant accounting policies and significant
assumptions that were made need to be disclosed. Prospective financial statements can also be called
pro forma financial statements.