 CONTINGENCY -is described as an event which is

not recognized because it is not

probable that an outflow will be  ADD BACK THE LOSS ON SALE OF
recognized or the amount cannot be THE LAND
reasonably estimated. This has to be added back since it was subtracted when
 PROVISION -IFRS defines provision as a net income was calculated, but it does not involve a
liability
cash outflow
that is uncertain in timing or amount.
Provisions are made for estimated  PROCEEDS FROM SELLING EQUIPMENT-
liability and recorded as a loss in INVESTING ACTIVITIES
earnings for the period of the MONEY – INVESTING ACTIVITIES
outcome is probable and measurable. BORROWING MONEY- FINANCING ACTIVITIES

 An overall audit strategy involves

 Cash flow from operations (indirect (1) determining the scope of the audit,
method) =
(2) determining the reporting objectives, and
net income
+ non-cash debits in income statement (3) considering various other important factors.
− non-cash credits in income statement
+ increases in current liabilities (except dividends  Inherent risk and control risk exist
payable) independently of the audit of financial
+ decreases in current assets (except cash and cash statements as functions of the client and its
equivalents) environment, whereas detection risk relates
− decreases in current liabilities (except dividends to the auditor's procedures and can be
payable) changed at his or her discretion.
− increases in current assets (except cash and cash
equivalents)  If equipment is purchased for one project
only, the costs are expensed as incurred; if
 Net income is prepared using accrual equipment is purchased for more than one
accounting and cash flow from operations is project, the costs are capitalized and
prepared using cash accounting. What this amortized.
means is that items that impact income but not
cash flow are included in net income but not in
cash flow from operations. Two of the more How does the balance sheet help users?
common non-cash expenses are depreciation  It assesses an entity's liquidity, solvency,
and amortization expense. financial flexibility, and operating
capability.
 Statement of Cash Flows and Financial
Statement Articulation 76
A balance sheet provides the account balance for  Loaning money would be classified as an
assets, liabilities, and equity as of a particular point in investing activity, whereas Borrowing
time. Looking at consecutive balance sheets helps money would be classified as a financing
investors see how those balances changed over time. It activity.
does not provide information on why those changes
occurred. The statement of cash flows provides
information on why those changes occurred since it
provides information on how cash was used to buy
assets, pay back debt, buy back stock, and pay
dividends. It also provides information on how cash
was generated from selling assets, borrowing money,
or issuing stock. Finally, it provides information on
how changes in operating current assets and liabilities
contributed to changes in cash. Therefore, this is the
correct answer.
Be HUMBLE AND BLESSING follows!
Marideth Gonzales Diaz

The one who raise themselves, will be lowered

and those who lower themselves, will be raised.
Marideth Gonzales Diaz