Answer:
The purpose of financial reporting is to provide relevant and reliable information to stakeholders such as investors, creditors, and regulators to help them make informed decisions about the company.
The qualitative characteristics of accounting information are relevance, reliability, comparability, and consistency. Relevant information is important and useful for decision-making, while reliable information is free from error and bias. Comparability ensures that information is comparable across different periods and companies, while consistency ensures that accounting methods are consistently applied.
The elements of financial statements are assets, liabilities, equity, revenue, and expenses. Assets are resources owned by the company, such as inventory and accounts receivable. Liabilities are obligations of the company, such as accounts payable and loans. Equity represents the residual interest in the assets of the company after deducting liabilities. Revenue is the inflow of economic resources resulting from the sale of goods or services, while expenses are the outflow of economic resources incurred to generate revenue.
Based on the information provided, Inverness Ltd.'s cost of goods sold would be Br 507,500 (Br 600,000 - Br 35,000 opening inventory). The company would have generated revenue of Br 684,125 (Br 600,000 x 1.35) and a gross profit of Br 176,625 (Br 684,125 - Br 507,500). Collections from customers totaled Br 420,000, and the company had an ending accounts receivable balance of Br 85,000, indicating that some sales were made on credit. The company's ending merchandise inventory was Br 225,000.