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In: Accounting

respond to the following in a minimum of 175 words: This week focuses on criteria for...

respond to the following in a minimum of 175 words:

This week focuses on criteria for calculating capital changes and consolidated financial statements.

Discuss the criteria for calculating capital changes. How do you calculate change in working capital from balance sheet?

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Expert Solution

The first requirement to calculate the changes in capital is to obtain the statement of financial position for the previous two years. The statement of financial position must represent the total current assets and total current liabilities. Using the balance sheet of the previous two financial years, we can calculate the changes in working capital as per the below formula.

Working capital = Current assets - Current liabilities

First we need to calculate the working capital for the previous two years using the above formula. Once we have the working capital of the previous two years, we can calculate the difference between these two working capital by subtracting one from another. This difference represents the change in working capital. We can also calculate the changes in working capital with the change in current assets and current liabilities. The statement of changes in working capital is used for the preparation of fund flow statement.

Please give likes for the work. Thanks & Regards.

ekkarill92 answered 2 years ago
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