How is retained earnings effect? Many factors affect an entity’s retained earnings, and these effects could increase or decrease accordingly. The primary elements that affect retained earnings are net income/ net loss and dividend payments. If the entity makes a lot of profit and subsequently net income, the earnings will eventually increase. Other factors that […]
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Retained earnings are what entity left from its operating profits since the beginning of the business until the reporting date. These amounts use for two main purposes: reinvestment or distribution to shareholders. It has happened only if the entity makes a profit, and if it is operating loss, then not even dividends could not be
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Definition: Retained earnings are the accumulation of the entity’s net profit from the beginning to the reporting date after deducting the dividend payments to shareholders. These earnings are the amounts used to distribute to shareholders or reinvests based on the entity’s dividend and investment policies. For the entity that grows to the position that has
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Overview: There are many audit procedures and approaches that auditors could use to perform during their detailed testing of the inventories report by management in the financial statements. Before going into detail on the procedure, it is good to start with the overview of inventories first. Inventories are the current assets that reporting in the
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What is inventory Inventories are items or assets that are held for selling to customers but not for internal use in business. Inventories are the entity’s assets that report in the financial statements are current assets on the balance sheet. The recognition of inventories in the financial statements of the entity is similar to the
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Definition: Physical verification is the procedure the auditor normally performs to confirm the existence of certain physical assets that are recorded in the client’s financial statements. Most of the assets that auditors verified are fixed assets and inventories. The auditor might also use this procedure to confirm the condition of those assets. The physical verification
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Overview: Auditors generally observe the inventory count performed by the client at the end of the year or accounting period. Most of the accounting book is closing at the end of the calendar year, and normally entity performs a full inventory count to assess the actual quantity and calculate the exact amount of inventory closing
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Overview: The balance sheet is one of the most important elements of financial statements. This statement shows the entity’s financial position at the point in time. What we mean by financial position is that this statement tells us how the entity’s assets, liabilities as well equity are at a specific time frame. For example, if
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Definition: Liabilities are the present obligation of the entity in the form of legally enforceable and result from past events. Liabilities will have future economic outflow from an entity. Those liabilities including account payable, salary payable, noted payable, accrual liabilities, short term loan, and long term loan. If the entity financial statements are prepared according
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Definition: Assets are resources that control by the entity and those resources are expected to have an economic inflow into the entity in the future. Those assets included cash, account receivables, care, computer equipment, land, building, and other resources the entity controls. The balance sheet is one of five financial statements that report the entity’s
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