Corporate Accounting
In a Corporate or Company forms of business, the Company is considered a separate entity, different from it’s’ owners or shareholders. The owners or promoters of a company have a limited liability. This means that they are not liable personally for the debts and obligations of the company. The formation of a company has strict regulations unlike sole-proprietorship and partnership. The corporate tax rates are also high.
Every company is required to submit annually an annual report which contains details about the company plus its period income statement and balance sheet. It may also contain statement of retained earnings and cash flows. The company will contain board of directors, in whom the decisions about the company matters are vested upon. The main advantage of a company is that it will attract the outside and public investors, who in turn take part in voting if they invest in the shares of the company.
Corporate Accounting:
Some of the topics covered under Corporate Accounting are:
1) Preparation of Classified and detailed Company Income Statement
2) Preparation of Classified Balance Sheet
3) Preparation of Statement of retained earnings and owner’s equity.
4) Preparation of Statement of Cash flows – direct and indirect method.
5) Accounting for Marketable or Trading securities and Available-for-sale securities.
6) Accounting for Manufacturing companies.
7) Accounting for service-oriented companies.
8) Accounting for Investment & banking companies etc.
9) All other various types of Company Accounting.
10) Accounting for various types of Inventory methods like FIFO, LIFO etc. and Perpetual/Periodic inventory systems.
11) All methods of depreciation for fixed assets
Example: (depreciation). A company purchased equipment worth $50,000 on 1st Jan 2008. It has an estimated useful life of 5 years and a salvage value of zero on disposal at the end of its life. It is expected to produce 15000, 10000, 8000, 4000 and 3000 units in the 5 years time respectively.(Total units = 40000)
Depreciation according to straight-line method ->
(Cost – Salvage value)/Estimated life -> ($50,000-$0)/5 -> $10,000 per year for 5 years.
Depreciation according to Units of activity method ->
Depreciation per unit = $50,000/40000 units = 1.25 per unit
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