What are the major limitations of the balance sheet as a source of information, and how can your role as an accountant ensure that the information presented does not include errors? How would you support your claims?

INTERMEDIATE ACCOUNTING

 

The Balance Sheet as an Investor’s Tool

You know that both internal and external users have not only the short-term success, but also the long-term success of the company at the forefront of their minds. One way that users determine short-term and long-term success is by use of the Balance Sheet. On the Balance Sheet a user may look at Retained Earnings along with the portfolio of assets displayed and compare that to the liability side of the Balance Sheet.

What are the major limitations of the balance sheet as a source of information, and how can your role as an accountant ensure that the information presented does not include errors? How would you support your claims?

FEDERAL TAX

Discussion
Vincent pays $20,000 for equipment to use in his trade or business. He pays sales tax of $800 as a result of the purchase. Must the $800 tax be capitalized as part of the purchase price?

Vincent’s friend tells him that capital gains tax is discriminatory in that it is imposed upon individuals who can afford to buy capital assets. Do you agree or disagree? Why? Why not? Be sure to include definitions of capital asset and capital gain in your response.

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