Balance Sheet Notes Preparation and Discussion Essay

This calendar week paper requires our team to prep atomic number 18 three notes to the balance sheet and income statement. Also, invite us to discuss why footnotes are useful and important to fiscal statements. Below we have included the requested footnotes (prepared based on our get under ones skin working with a CPA Firm in public accounting) and our banter think in relation to the footnotesInventoryInventory is stated at the lower of cost or market using the first-in, first-out method of breed accounting. Inventory includes certain costs associated with the preparation of inventory for resale, including distri notwithstandingion costs, labor, and freight. The confederation records a confine for the anticipated loss associated with selling inventories below cost. This reserve is based on managements current knowledge with pry to inventory levels, sales trends and historical experience (Lowes).Property and Equipment and wear and tear insuranceProperty and equipment are sta ted at cost. Expenditures for maintenance and repairs are supercharged against operations. Renewals and betterments that materially extend the life of the assets are capitalized. Depreciation is computed on a straight-line basis over the estimated useful life of the related assets. For income evaluate purposes, depreciation is computed using the accelerated cost method (AICPA).The ships company periodically reviews long-lived assets for impairment whenever events or changes in circumstances fate that the carrying amount of anasset whitethorn not be recoverable. No try out of impairment is evident as a result of such review.Income TaxesThe guild establishes deferred income tax assets and liabilities for temporary differences between 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 allowance is record ed to reduce the carrying amount of deferred tax assets if it is to a greater extent likely than not that all or a portion of the asset will not be realized. The tax balances and income tax expense accepted 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 schooling that otherwise cannot be included in the body of the F/S, but important enough to influence the judgment of a user or reader (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 away concern issues, contingencies, and subsequent events, which are rel evant 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 demand for timely accuracy (Chron, 2015).ReferencesAICPA (2015). Illustrative pecuniary Statements Prepared Using the Financial Reporting Framework for Small 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