tinuous losses. For this reas this closure have been esti of those affected including m s period ends on 31 Decembe
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
![Presented below are two independent cases of MAA Bhd:
Case 1:
On 15 October 2019, the board of directors of MAA Bhd decided to close down one of
its overseas divisions due to continuous losses. For this reason, a detailed plan was
drafted and all costs associated to this closure have been estimated. Besides that, the
decision was communicated to all of those affected including notices to the staff of the
division. The company's accounting period ends on 31 December.
Case 2:
On 20 November 2019, Aqeem Enterprise filed a lawsuit of breach of contract against
MAA Bhd for RM2.5 million. Based on the recent evidence obtained by the company's
legal advisor, it is believed that the realisation of liability from this claim is reasonably
possible. The company's accounting period ends on 31 December.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa23a40d8-ba62-479e-a155-f979216b92fe%2F92b209bc-879c-4f15-9f29-459ff87d74b7%2Fyugcgol_processed.png&w=3840&q=75)
![REQUIRED:
(a)
Based on the MFRS 137 Provisions, Contingent Liabilities and Contingent
Assets, discuss the appropriate treatment for each of the above cases by MAA
Bhd for the year 2019.
(b)
State THREE (3) situations where contingent liabilities should not be recognised
in the financial statements based on Paragraph 13 of MFRS 137 Provisions,
Contingent Liabilities and Contingent Assets.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa23a40d8-ba62-479e-a155-f979216b92fe%2F92b209bc-879c-4f15-9f29-459ff87d74b7%2Fpcm1lnk_processed.png&w=3840&q=75)
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