In: Accounting
The Balance Sheet and Financial Disclosures
The president of the Santander Company is upset! The president has just received the first draft of the company’s annual financial statements for the year ended December 31, 2014, prepared by the company’s controller. The statements show an overdraft in one of the company’s bank accounts as an item in the current liabilities section of the balance sheet. The company experienced a very difficult year during 2014, although the first month of 2015 has shown some improvement. The Santander Company is a public company and may wish to issue additional common shares in the near future. The proceeds of the stock issuance would be used to acquire new equipment that could prove vital in reversing the company’s decline.
Required:
Has the controller properly reported the bank overdraft? What factors should be considered in reporting this item?
Yes, the controller properly or accurately stated or described the bank overdraft correctly.
Under GAAP (generally accepted accounting principles), a bank overdraft should be described or record as a present liability.
Under the International Financial Reporting Standard, a bank overdraft may be stated as an offset of capital or money assets, that will be decreased or drop or lower or lesser from gross cash and cash equivalents. Accordingly, IFRS ( International Financial Reporting Standard ) is also adjustable than GAAP ((generally accepted accounting principles) as far as bank overdrafts are concerned.
Businesses or firms or corporations or organizations have many or several bank accounts. In such situations, the net balance of one bank might be +ve or Positive and the net balance of different banks might be -Ve ( Negative). Then the Businesses or firms or corporations or organizations should reflect the +ve (positive) cash balance as money or bill or amount and the -ve(( Negative) money or amount balance (of another bank) as an overdraft.
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