Balance Sheet Notes Preparation and Discussion Essay

This week paper requires our team to get to three notes to the balance sheet and income statement. Also, request us to discuss why footnotes ar useful and important to financial statements. Below we have include the requested footnotes (prep atomic number 18d based on our experience working with a certified public accountant Firm in public accounting) and our discussion related in resemblance to the footnotesInventoryInventory is declared at the lower of cost or market use the first-in, first-out method of inventory accounting. Inventory includes certain cost associated with the preparation of inventory for resale, including distribution costs, labor, and freight. The Company records a reserve for the expect loss associated with selling inventories below cost. This reserve is based on cares current knowledge with respect to inventory levels, sales trends and historical experience (Lowes).Property and Equipment and Depreciation PolicyProperty and equipment are stated at cost. Ex penditures for maintenance and repairs are charged against operations. Renewals and betterments that materi all in ally extend the life of the assets are capitalized. Depreciation is computed on a straight-line nucleotide 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 loss whenever events or changes in circumstances indicate that the carrying amount of an asset whitethorn 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 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 evaluate to be in effect when the differences reverse. A valuation allowance is save to reduce the ca rrying 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 aggregate jurisdictions (Lowes).Team DiscussionFirst of all, it is a fact that footnotes are an constitutive(a) part of the financial statements (F/S). They contain information that otherwise cannot be include in the body of the F/S, but important enough to mildew the judgment of a user or reader (Kieso, Weygrandt & Warfield). much(prenominal) information could be express either as an explanatory paragraph, entry or timetables, useful to help users have a better mind of how the company he intend to invest or extend character reference operates, its environment, industry, and how it measure and records transactions. Additional information like going concern issues, contingencies, and consequent 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 afterward 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 material 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