The document contains financial statements for TechPay Limited for the period ended December 31, 2022, including an income statement prepared under GAAP standards and balance sheets prepared under both GAAP and IFRS standards. The income statement shows the company's revenues, costs, expenses and net operating income. The GAAP balance sheet lists the company's assets, liabilities, and owner's equity. The IFRS balance sheet differs in how some items are classified as current or non-current assets/liabilities. A memo further explains key elements of the income statement and balance sheet and differences between GAAP and IFRS standards.
The document contains financial statements for TechPay Limited for the period ended December 31, 2022, including an income statement prepared under GAAP standards and balance sheets prepared under both GAAP and IFRS standards. The income statement shows the company's revenues, costs, expenses and net operating income. The GAAP balance sheet lists the company's assets, liabilities, and owner's equity. The IFRS balance sheet differs in how some items are classified as current or non-current assets/liabilities. A memo further explains key elements of the income statement and balance sheet and differences between GAAP and IFRS standards.
The document contains financial statements for TechPay Limited for the period ended December 31, 2022, including an income statement prepared under GAAP standards and balance sheets prepared under both GAAP and IFRS standards. The income statement shows the company's revenues, costs, expenses and net operating income. The GAAP balance sheet lists the company's assets, liabilities, and owner's equity. The IFRS balance sheet differs in how some items are classified as current or non-current assets/liabilities. A memo further explains key elements of the income statement and balance sheet and differences between GAAP and IFRS standards.
The document contains financial statements for TechPay Limited for the period ended December 31, 2022, including an income statement prepared under GAAP standards and balance sheets prepared under both GAAP and IFRS standards. The income statement shows the company's revenues, costs, expenses and net operating income. The GAAP balance sheet lists the company's assets, liabilities, and owner's equity. The IFRS balance sheet differs in how some items are classified as current or non-current assets/liabilities. A memo further explains key elements of the income statement and balance sheet and differences between GAAP and IFRS standards.
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Module 2: Financial Statements
Nexford University ACC 6050 Accounting and Financial Reporting Professor Damian Dunbar December 04, 2023
Income Statement using GAAP Standards
TechPay Limited Income Statement for the Period Ended December 31, 2022 $ Income 750,000.00 Cost of sales and operations 145,000.00 Gross margins 605,000.00 Operating expenses Salaries and wages 150,000.00 Advertising 25,000.00 Car and truck expenses 75,000.00 Depreciation 4,000.00 Employee benefit programs 10,000.00 Insurance 6,000.00 Legal and professional 12,000.00 Mortgage interest 3,000.00 Other interest paid 2,500.00 Office expenses 5,500.00 Pension and profit sharing plans 10,500.00 Rent on machinery and equipment 5,000.00 Rent on other business property 20,000.00 Repairs 4,000.00 Taxes paid 9,500.00 Travel 20,000.00 Utilities 2,750,00 Other 2,350.00 Total operating expenses 367,100.00 Net operating income 237,900.00
Balance Sheet using GAAP Standards
TechPay Limited Balance Sheet December 31, 2022 Assets $ Cash 100,000.00 Account receivable 300,000.00 Inventories 15,750.00 Prepaid expenses 30,400.00 Property, Plant and Equipment 190,000.00 Less (Accumulated depreciation) 4,000.00 632,150.00 Liabilities Accounts Payable 150,000.00 Short-term loans 75,530.00 Deferred income tax 4,640.00 Long-term debt 97,950.00 328,120.00 Owner's Equity Capital 56,000.00 Retained Earnings 10,130.00 Current Earnings 237,900.00 304,030.00 632,150.00
Balance Sheet using IFRS Standards
TechPay Limited Balance Sheet December 31, 2022 Assets Non-Current assets: $ $ Property, Plant and Equipment 190,000.00 Less (Accumulated Depreciation) (4,000.00) Total non-current assets 186,000.00 Current assets: Inventories 15,750.00 Prepaid expenses 30,400.00 Trade Receivables 300,000.00 Cash 100,000.00 Total current assets 446,150.00 Total Assets 632,150.00 Equity and liabilities Equity Capital 56,000.00 Retained Earnings 10,300.00 Total equity 66,300.00 Non -current liabilities Borrowings 173,480.00 Deferred income tax 4,640.00 Total non-current liabilities 178,120.00 Current liabilities Accounts Payable 150,000.00 Total equity and liabilities 632,150.00
MEMO From: Oluwakemi Fawole To: Jennifer Doherty Date: December 4, 2023 Subject: Understanding GAAP Income Statement, GAAP Balance Sheet, and Differences between GAAP and IFRS Standards The income statement, also known as the Profit and Loss Statement, is a critical financial document that provides insights into your company's performance over a specific period. It begins with the total sales or service income, which represents the revenue. Following revenue, various expenses are listed. These include costs directly tied to the production of goods, known as the Cost of Goods Sold, and operational expenses, such as administrative and selling expenses. The culmination of this statement is the net income, often referred to as the "bottom line." This figure is pivotal as it represents what remains after all operating expenses, interest, and taxes have been deducted from the total revenue. The net income is a key indicator of your company’s profitability and financial health. The balance sheet offers a snapshot of your company's financial position at a specific point in time. It lists assets, liabilities, and shareholders' equity. Assets, the resources controlled by your company, are usually listed in order of liquidity, i.e., how quickly they can be converted into cash. This includes current assets like cash and receivables, as well as long-term assets like property and equipment. On the other side, liabilities represent what your company owes, classified into short-term (due within a year) and long-term obligations. Shareholders’ equity, the residual interest in your company's assets after deducting liabilities, includes elements such as issued capital (common stock) and retained earnings. This balance sheet serves as a fundamental tool for assessing the financial stability and capability of your business. The differences between GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) are significant and can notably affect how a balance sheet is presented and interpreted. One of the primary distinctions lies in the approach each standard takes: GAAP is more rules-based, offering specific guidelines for various scenarios, while IFRS is principles-based, allowing for broader interpretation and flexibility. This fundamental difference influences several aspects of the balance sheet. For instance, under IFRS, companies have the option to revalue fixed assets such as property, plant, and equipment, potentially impacting their book value and altering the asset side of the balance sheet. In contrast, GAAP requires fixed assets to be recorded at historical cost minus accumulated depreciation. Additionally, IFRS and GAAP differ in their treatment of certain liabilities and equity classifications, particularly in terms of distinguishing between current and non-current liabilities. These disparities can result in variations in the reported values and structure of the balance sheet.
