Long Answer: A. Critically evaluate the concept of adequate disclosure and identify appropriate examples for the types of information that would be disclosed. B. You are reviewing the accounting records of Max Electricals, owned by Max Jose. You have uncovered the following situations. Determine any violation of accounting principle and propose the right action to be taken in accordance with the appropriate accounting principle Cathy Industries paid to Max Electricals $25,000 on 10th May 2018 for the Electrical products they ordered. Max Electricals recorded the amount as revenue of May 2018. The products will be delivered to Cathy Industries in June 2018.
A. Concept of Adequate disclosure refers to the financial statements, footnotes and schedules to give appropriate and correct information of the companys financial position.
The financial statements should present a true and fair view of the companys accounts and its financial position.
The disclosures are additional information attached to financial statements to give more detailed information on or explanations to activities that has affected the financial results.
It requires the disclosure of appropriate changes in the financial statements to give more information to the users and to not mislead them.
Examples.
1.Contingent liabilities should be disclosed as a footnote in the balance sheet.
2.Accounting policies followed should be discosed so as to enable the users to understand the financial statement.
3.Companies are free to use different methods of depreciation, so they should disclose as a footnote which method they have used.
4.Internal rules of the company affecting the financial statements must be disclosed so that the users can evaluate the financial statements in a meaningful manner.
5.Capital expenditure needs to be disclosed.
6.EXEMPT Income neeeds to be disclosed.
Thus, adequate disclosure requires the full disclosure of all the information which will be useful to users to compute, read and evaluate the financial statement in a meaningful manner
Long Answer: A. Critically evaluate the concept of adequate disclosure and identify appropriate examples for the...