Week 4: General Flashcards
Accumulated depreciation vs depreciation expense
Depreciation expense is the amount that a company’s assets are depreciated for a single period (e.g, quarter or the year), while accumulated depreciation is the total amount of wear to date.
Accumulated depreciation is a negative asset
Bookkeepers never do
Depreciation and taxes
Uncollectable accounts journal entry
Debit
Bad debt
Credit
Provisions
If you want to see fraud on the financial statements…
Look at the cutoff date
Last two month and first two months of a year
If you want to see fraud yourself live…
Go to the mailroom not to the CEO
Guy who always visits the place he invests in
Peter Lynch
Bank Reconciliation
To check with the bank to see if a firm’s reported cash is correct
How do you check to see if accounts receivable is correct?
Ask the client of the company, not the company itself
How to verify a bank loan?
Have the bank send you a bank statement
What do you have to do as an accountant checking over the financials of a firm?
You have to check every single number a company gives to you to certify a company’s financial statements.
Third-party verification
Why does a bank want a CPA’s verification on a company’s financial statement?
Because if the company goes under for fraud, the bank can sue the CPA
Vertical common-size financial
is an income statement or balance where each line item is expressed as a percentage
Income Statement:
divide each item by revenue
(= (item) / revenue)
Balance Sheet:
divide each item by total assets
(= (item) / total assets)
When writing on financial statements, what should one always write?
“as per the client”
Net working capital
= current assets - current liabilities
What fraud could have Evergrande engaged in?
They could have recognized revenue before performing their obligation
