Balance Sheet Notes Preparation and Discussion Essay Example for Free

Balance Sheet Notes zeal and Discussion EssayThis week paper requires our team to prep be three notes to the balance sheet and income statement. Also, ask us to discuss why footnotes are usable and important to financial statements. Below we have include the requested footnotes (prepared ground on our follow through working with a CPA Firm in customary accounting) and our discussion related in relation to the footnotesInventoryInventory is stated at the lower of follow or market using the first-in, first-out regularity of farm animal 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 solicitudes current knowledge with respect to inventory levels, sales trends and historical experience (Lowes).Property and Equipment and Depreciation PolicyPrope rty and equipment are stated at cost. Expenditures for maintenance and repairs are charged against operations. Renewals and betterments that materially extend the life of the assets are capitalized. Depreciation is computed on a straight-line institution over the estimated useful life of the related assets. For income tax 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 chair of such review.Income TaxesThe Company establishes deferred income tax assets and liabilities for temporary differences between the tax and financial accounting bases of assets and liabilities. The tax effectuate 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 allo wance is recorded to reduce the carrying amount of deferred tax assets if it is more(prenominal) 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 reading that otherwise cannot be included in the form of the F/S, but important enough to influence the judgment of a user or proofreader (Kieso, Weygrandt Warfield). Such information could be express either as an explanatory paragraph, schedule or timetables, useful to help users have a better understanding 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 reach 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 the true (Chron, 2015).ReferencesAICPA (2015). Illustrative Financial Statements Prepared Using the Financial Reporting Framework for low-toned 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