Balance Sheet Notes Preparation and Discussion Essay Example for Free

Balance Sheet Notes Preparation and Discussion EssayThis week paper requires our team up to prep be three notes to the balance sheet and income statement. Also, request us to discuss why footnotes are useful and important to monetary statements. Below we have include the requested footnotes (prepared based on our experience working with a CPA Firm in public accounting) and our discussion related in relation to the footnotes caudexInventory is stated at the lower of cost or market using the first-in, first-out method of inventory accounting. Inventory includes certain costs associated with the preparation of inventory for resale, including distribution costs, labor, and freight. The Company records a reserve for the anticipated loss associated with selling inventories below cost. This reserve is based on circumspections current familiarity with respect to inventory levels, sales trends and historical experience (Lowes).Property and Equipment and Depreciation PolicyProperty a nd equipment are stated at cost. Expenditures for maintenance and repairs are supercharged against operations. Renewals and betterments that materially extend the life of the pluss are capitalized. Depreciation is computed on a straight-line basis over the estimated useful life of the related assets. For income impose purposes, depreciation is computed using the accelerated cost method (AICPA).The Company periodically reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of anasset may not be recoverable. No evidence of impairment is evident as a result of such review.Income TaxesThe Company establishes deferred income tax assets and liabilities for temporary differences in the midst of the tax and financial accounting bases of assets and liabilities. The tax effects of such differences are reflected in the balance sheet at the enacted tax rates expected to be in effect when the differences reverse. A valuation all owance is recorded to reduce the carrying amount of deferred tax assets if it is more likely than not that all or a portion of the asset will not be realized. The tax balances and income tax expense recognized by the Company are based on managements interpretation of the tax statutes of multiple jurisdictions (Lowes).Team DiscussionFirst of all, it is a fact that footnotes are an integral part of the financial statements (F/S). They contain data that otherwise cannot be included in the body of the F/S, but important enough to influence the judgment of a user or ref (Kieso, Weygrandt Warfield). Such information could be express either as an explanatory paragraph, schedule or timetables, useful to help users have a better intelligence of how the company he intend to invest or extend credit operates, its environment, industry, and how it measure and records transactions. Additional information like going concern issues, contingencies, and subsequent events, which are relevant to re ach a conclusion, are included in the footnotes as well. When this happens, it raises red flags to readers, because they provide information and events they may have been occurred after the end of the financial statements period, which is necessary for timely accuracy (Chron, 2015).ReferencesAICPA (2015). Illustrative Financial Statements Prepared Using the Financial Reporting Framework for scummy and Medium Entities. Retrieved from http//www.aicpa.org/InterestAreas/FRC/AccountingFinancialReporting/PCFR/DownloadableDocuments/FRF-SME/FRFforSMEs_Illustrative_Financial_Statements.pdf Chron Small Business. (2015). Guide-making Footnotes to Financial Statements. Retrieved from