Define THREE (3) accounting concepts: historical cost; matching and prudence
Historical cost According to historical cost concepts, all transactions must be recorded at purchase price or purchase cost. The amount will be recorded in the accounting book despite the volatility of the market price of the item. The cost of buying is an objective value as the price is evident in business documents.
Matching
According to the matching principle, the revenue for an accounting period must be matched with the expenditure for that period to gain profit or loss for the period. The profit or loss of a business cannot be calculated based on receipt or payment within a period of time. Income for an accounting period is the amount of money received for the
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We do not need to rephrase the financial statements every year, despite the economic changes in inflation or deflation. It also makes the calculation of annual depreciation easier than having to deal with frequently changing asset values ( Baskerville 2015) Next is consistency, this concept is consistent with the aim of accounting which is primarily charged with accurately recording the past financials of a business.( Baskerville 2015) Moreover, the advantages of the historical concept are objectivity. It records the original cost of an item. Under historical accounting, it ensures the report of a financial position of a business is able to verify the independent documentary evidence. For example, invoice, receipt, voucher and etc. ( Baskerville 2015) …show more content…
Money is commonly used as the measuring unit while preparing a financial statement. The consolidated financial statements of the Group and the Company have been prepared using Ringgit Malaysia (RM), which is the Group’s and the Company’s functional currency. Transactions with other foreign countries will also translate into the functional currency- Ringgit Malaysia (RM) using the exchange rates prevailing at the dates of the transactions. In the annual report 2016 of 7-ELEVEN MALAYSIA HOLDINGS BERHAD (5250), Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and other accounts are all being prepared using Ringgit Malaysia (RM). This is because the company is located in Malaysia, hence the company must follow the laws of Malaysia which required them to present their annual report in currency of Malaysia- Ringgit Malaysia
In accrual accounting, income is recorded when a sale is made and expenses are recorded when goods or services are received. If payment is made in advance for services to be completed in the next tax year, tax payment can be delayed until that next
8 Nov. 2015. . . I used this source when writing the start of my booklet. When I evaluated my source i determined that the currency scored a 4 this is due to the publication being fairly recent as it was made in 2013 and provides a full date. I found this Information extremely useful when writing my booklet which gave it a 5 for relevance.
As you can see from the above currency conversion, there is a vast difference from each area of the world. Global currency conversion varies from country to country. Numerous factors determine exchange rates and are all related to the trading relationship
When being placed in the role of a manager, it is important to understand the finances of the organization and how to read and understand the recording of finances. It is also important to understand how all the different parts of the records fit together to give us the knowledge of where the business is financially. Knowing also the different responsibility centers related to financial recording and how they function is important as a manager. Once a manager understands what and where items belong on a balance sheet, they will better understand the state that the business is in. “It provides you with a picture of the financial health of your practice or organization on a certain date.”
When recording financial activity of a business, “any increase in expense (debit) must be offset by a decrease in assets or an increase in liability (credit)” (Routh 464). Any expense for any office supplies decreases cash or increases accounts payable. Each account is assigned a number to enter data in a list of categories “to track the sub-accounts of assets, liabilities, income, expenses, and equity” (Routh 464). This is a way to bookkeep the charts of accounts.
Tootsie Roll Tootsie Roll industries is a company that has engaged its operations in manufacturing and selling confectionery products for over 100 years. The company produces a number of products including Tootsie Roll pops, charms and Blow Po among other products. This paper will highlight on the company’s accounting policies and estimates disclosures as well as looking at the company disclosures based on the identified policies. Revenue recognition One of the accounting policies that have been identified in the company’s annual report is the revenue recognition policy.
ACC 201 Final Project Part I Accounting Cycle Report Vanessa Ann Williams Southern New Hampshire University The accountant cycle has really impacted me to gain insight on the financial side of Peyton Company. In the accountant cycle, there are many particular directions involve determining the growth of the company such as steps, role, omission and financial statements. It’s important to apply every step from the accountant cycle to make a financial critical decision in the long run. This report will have a breakdown of how to apply the accountant cycle for Peyton Company to be aware of future financial decisions to keep the company holding strong.
Edmonds, T. P., Tsay, B., & Olds, P. R. (2011). Fundamental managerial accounting concepts (6th ed.). New York, NY: McGraw-Hill
In 2002, the SEC adopted new rules and amendments to address public companies’ disclosure or release of certain financial information that is calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles. The accrual accounting is more popular and be widely used in business world because it produces more accurate and faithful financial statements that constitute better representation of actual circumstances than its main competitors. The major weakness of accrual accounting is that there is some time issue such like the time of occurred and time of recorded would probably be different and it increases the risk of financial information and the risk of correctness. Also, the accrual accounting generally cost more to operate compared with cash accounting
Goldratt believes that physical restraints are easier to identify. If the time constraint is overcome by company, another constraint will appear in store. Often appear market restrictions (when there is insufficient demand for any product), this situation sometimes makes managers think that the constraint is out of their control as they are only the provider of other’s products to the direct customer. On many other occasions, the constraint is self-created by the same management through the definition of internal policies. Goldratt, "hardly find a company with a real market restriction, as all are with ruinous policies marketing restrictions” (Oglethorpe and Heron, 2013).
Also many companies reporting related to the state of the value added or environmental information, these are concentrated in industrial sectors. The financial statements reflect the financial position of company, financial performance and cash flows of the company, it is significant to note that the correct depiction of the impacts of transactions and other events and circumstances according to the explanations and criteria identification of assets, liabilities, income and expenses go in the same outline (Brealey,
It is this that justifies accounting history as a crucially important academic discipline. “History, in itself is instinctive and indigenous to all of us” (Carnegie. et al, 2011), whether individuals know it or not, everyone’s decision making process is strongly based on past experiences, and the past is the key source resorted to whenever a decision is needed to be made. The same is applicable to accounting, the decisions made today in all practices and approaches are drawn from the historical developments in the accounting process, that have led the practice
These procedures include audits and tax consultation, which demands not just knowledge of the tax law but also of interest, gross profit calculations and other business concepts. Also, an accountant must be skilled in math in order to perform practically in any aspect of their job. If a person has an interest to pursue accounting courses, gaining a broader view of the overall accountant’s work will truly help a person to decide whether to enter the field or
Income data (experiences, estimates of sales, fund rising, membership etc and planned activities). Data come from previous budgets, estimates, experience of others and public available statistics. I was also able to identify the main uses of accounting and these are as follow: Information All organizations need to keep records of their financial transactions so that they can access Information about their financial position, including: summary of income and expenditure, the outcome of all operations, assets and liabilities.
The main important purpose of the accounting information system is to promote the activity of the enterprise and to form a reliable and real picture of it. In addition, the accounting information system promotes the activity of the enterprise effectively by preparing up-to-date information statements, providing as much information as possible so that the data should be understandable all users not only for the experts(bookkeepers) and tracking liquidity. Nowadays accounting software is a programme which makes accounting work processes easier and faster and which makes it possible to meet the information demand of the management. It also can support the accountants’ work, helping to compile reports by in helping to compile reports by recording and processing the events concerning the