Q. Learning objectives of Horizontal and vertical analysis?
- An account is a storage element used to classify and summarize money measurements of business activities of a similar nature.
- A firm sets up an account at any time it requires to provide useful information about a particular business item to some party having a valid interest in the business.
- A T-account look like the letter T.
- Debits are entries taking place the left side of a T-account.
- Credits are entries taking place the right side of a T-account.
- Debits increase expense, asset and Dividends accounts.
- Credits raise stockholders' equity, liability and revenue accounts.
- Analyze transactions by exploratory source documents.
- Journalize the transactions in the journal.
- Post journal entries headed for the accounts in the ledger.
- Organize a trial balance of the accounts and complete the work sheet.
- Organize financial statements.
- Post and Journalize adjusting entries.
- Post and Journalize closing entries and prepare a post-closing trial balance.
- A journal contains a sequential record of the transactions of a business. An instance of a general journal is shown in Exhibit 11. Journalizing is the procedure of entering a transaction in a journal.
- Posting is the procedure of transferring information recorded in the journal to the proper places in the ledger.
- Cross-indexing is the placing of (a) the account number of the ledger account in the general journal and (b) the general journal page number in the ledger account.
- A trial balance is a catalogue of the ledger accounts and their debit or credit balances.
- If the trial balance doesn't balance an accountant works backward to discover the error.
- Horizontal examination involve calculating the dollar and/or percentage changes in an item from one year to the next.
- Vertical analysis demonstrates the percentage that each item in a financial statement is of some significant total.