How does a large purchase of a machine (Fixed Assets), affect the three financial statements shorts

#accounting #accountinglectures #jobs #accountancy #class11 #class12 #financialstatements #interview #fixedassets How does a large purchase of a seven thousand dollar machine, paid on credit, affect the three financial statements, the balance sheet, income statement and cash flows? Tricky questions - Accountant job interview questions 2 The machine will be recorded among the fixed assets in the statement of financial position at a value of seven thousand dollars, and in return, liabilities of the same value will be recorded in the statement of financial position. The operating expenses of the machine, such as electricity, fuel, depreciation, and others, may affect the statement of financial position, specifically the item of inventory or construction in progress, but when sales take place or the revenues are recognized, they may affect cost of sales or cost of revenues, in the income statement. In the event that the machine is not used for production purposes, such as air conditioners in corporate offices, operating expenses will be charged directly to the income statement. In the statement of cash flows, this transaction will not appear within the cash flows from investing activities, because it represents a non-cash transaction. But its effect will often appear, within depreciation in the statement of cash flows, when the machine depreciation expense is excluded from net income, for the purposes of calculating cash flows from operating activities using the indirect method.

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