Thomas Medical Centre

Thomas Medical Centre

Thomas Medical Centre

Answer 1)

When an accountant records a sale or expense entry using double-entry accounting, he or she sees the interconnections between the income statement and balance sheet. A sale increases an asset or decreases a liability, and an expense decreases an asset or increases a liability. Therefore, one side of every sales and expense entry is in the income statement, and the other side is in the balance sheet. You can't record a sale or an expense without affecting the balance sheet. The income statement and balance sheet are inseparable, but they aren't reported this way. To properly interpret financial statements, you need to understand the links between the statements, but the links aren't easy to see.

Each financial statement appears on a separate page in the annual financial report, and the threads of connection between the financial statements aren't referred to. The financial statements of a company are developed from the bookkeeping process of the business firm. As the firm records the financial transactions of the firm over an accounting time period, the financial statements begin to appear. They are developed through recording the transactions in the accounting journal and the general ledger. The financial statements come together from those records. The financial statements are based on the accounting equation.

Answer 2)

As compared to previous year, Thomas Medical Centre's expenses have increased. In the year 2008, the administrative expensive increased from $8,600 to $9,845 in 2009. Same is the case with the other operating expense which also increased from $4,865 in 2008 to $5,476 in 2009. The expenses are defined as the economic costs that a business incurs through its operations to earn revenue. In order to maximize profits, businesses must attempt to reduce expenses without also cutting into revenues. Because expenses are such an important indicator of a business's operations, there are specific accounting rules on expense recognition.

Answer 3)

Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally expensed based on the time period over which the asset was used. Depreciation and amortization (as well as depletion) are methods that are used to prorate the cost of a specific type of asset to the asset's life. It is important to mention that these methods are calculated by subtracting the asset's salvage value from its original cost. Amortization usually refers to spreading an intangible asset's cost over that asset's useful life. For example, a patent on a piece of medical equipment usually has a life of 17 years. The cost involved with creating the medical equipment is spread out over the life of the patent, with each portion being recorded as an expense on the company's income statement.

Depreciation, on the other hand, refers to prorating a tangible asset's cost over that asset's life. For example, an office building can be used for a number of years before it becomes run down and is sold. The cost of the building is spread out over ...