Question

a) Describe how debt and stock investments are reported in financial statements.

b) Evaluate the effects of unusual or irregular items on financial statements.

Answer 1

Answer:

a)

For understanding, how debt and stock investments are accounted for in fiscal statements, first we need to comprehend what are Debt and Stock investments.

Debt investments:

Debt investment is a sort of investment in a firm, by acquisition of various debt instruments like bonds,debentures and so on.

Stock investments:

Stock investment is made by the firm, by acquisition of various equities and stocks.

Subsequent to understanding the significance of Debt and Stock investment, Next to understand how debt and stock investment are accounted for in fiscal statements.

.

As we probably am aware Debt investment is because of the acquisition or purchase of bonds and so forth, so it is named Trading securities, ready to sale securities, or held-to-maturity securities for valuation and reporting purposes.The classification is made based on the period, the firm holds it. Both debt and Stock investment are recorded utilizing the cost technique.

Debt investment is also named as Held-to-maturity securities, when business or firms hold the bonds and so on untill it matures. It might be long period or short period relies upon the maturity date. Thus, In Balance sheet, it tends to be classified as short term (current ) investment or long haul investment relies upon the maturity date.( Only debt investment can be named Held-to-maturity securities since stock investment doesn't have any maturity date.)

As we probably am aware stock investment is because of the investment made by the acquisition of different sorts of stocks and assets. Along these lines, it can likewise be named trading securities and available-for-sale-securities relies upon the reason for investment.

Consequently, Debt investment and Stock Investment, the two investments can be named Trading securities or available-for-sale-securities.

On the off chance that debt and stock investment are held for the selling purpose inside a period, it is namedTrading securities and considered as short term assets.

Then again, Debt and Stock investments can likewise be named Available-for sale securities,when the debt and stock investment are held for selling purposes either for short period or long haul period. It tends to be named long haul assets or short term assets based on the board's aim of when to sell the securitties.

Conclusion:

Just debt investment is named as Held-to-maturity securities as just debt instrument has maturity date and can hold till its maturity date and can be considered as short teerm assets or long haul assets based on its maturity date.

On the other date, Both debt investment and stock investment are named trading securities and available for sale securities, relies upon the time of sale. On the off chance that debt and stock investment, is held for brief period and the reason for existing is to sell inside a period, it is named trading securities. While, if the debt and stock investment,, are held for selling purposes either for short term and long haul , so it very well may be named Available-for - sale securities and can be considered as short term assets or long haul assets .

b)

Unusual items incorporate discontinued activities, unprecedented things or items and changes in accounting standards. Discontinued activities allude to the sale or shutdown of a critical working or operating unit. For instance, the expenses related with shutting down abroad manufacturing tasks would consider unusual costs.Unusual costs are rare or one-time occasions, for example, harms or damages brought caused by natural disasters and mishaps.Irregular costs additionally remember changes for accounting standards, for example, a change from cash basis to accrual-basis accounting..

Income statements show unusual items or irregular items in a different segment close to the bottom. Things must be both unusual and inconsistent to be right now. For instance, gains and misfortunes from disposal of fixed assets or changes in stock valuations are not part of this segment. Organizations may show the total income from proceeding or ordinary tasks as a different detail, at that point list the uncommon and discontinued items, lastly show the overall gain or net income. The income statement shows these irregular items net of taxes.