With the increasing complexity of the modern business environment, many accounting related topics in ACC 40A is under scrutiny now. This paper will evaluate some key current accounting related topics in ACC 410A that are of considerable importance in the present business context. Time value of money is a key aspect of accounting because every business transaction is recorded in terms of monetary value. Businesses generally do not record transactions in books of accounts if those transactions cannot be expressed in terms of money. There are two common methods such as historical cost and market value are used to record financial transactions in account books. Under historical cost approach, an asset’s original cost at the time of its acquisition is recorded in the firm’s accounting books whereas the current or fair market value of the asset is estimated and recorded in case of the market value approach. Both these accounting techniques have their own advantages and disadvantages. As Ahya points out, the historical cost approach is more reliable and hence it is necessary for the preparation of financial statements. As the author points out, historical cost method is based on the actual transaction and hence this valuation technique will be verifiable and free from management bias (33-34). It is clear that management personnel cannot manipulate asset values to meet their personal interests under the historical cost concept. In contrast to this view, a group of accounting professionals argues that the historical cost approach considers very old data and therefore it cannot provide the most relevant information to investors. They add that the historical cost method does not take into account the possible changes in the market value of money over the past years since the purchase of a particular asset. Evidently this practice would not ensure a true and fair view of the financial statements and hence many experts propose a fair market valuation method for asset valuation. Considering the frequent fluctuations in the current global financial market, it is not good to follow a historical cost approach. Holton and Bates opine that a fair market value approach may increase the chance of business fraud and other unfair business practices like profit inflation (52). Furthermore, the absence of a common asset valuation technique contributes to the difficulty in the analysis and comparison of financial statements. Hence, it is necessary to develop a single technique for evaluating assets. Accounting for Cash There are two different accounting concepts such as accrual accounting and cash accounting based on the way transactions are recorded. According to Hankins and Baker, under the accrual accounting method, financial transactions are recorded as they occur (414). The major benefit of this accounting practice is that it assists the management to maintain record of entire business transactions. In addition, this technique can help the top management to identify sales trends relating to particular economic conditions in the business environment. Accounting professionals opine that this method may greatly benefit investors and credit lenders to make sound financial decisions. GAAP requires organizations to follow accrual accounting under certain circumstances. Generally, business houses choose the accrual accounting approach if they expect a notable business growth in the near future in order to avoid issues associated with a changeover period. However, this accounting practice requires the management to
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There are two different accounting concepts such as accrual accounting and cash accounting based on the way transactions are recorded. According to Hankins and Baker, under the accrual accounting method, financial transactions are recorded as they occur…
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1 pages (250 words)Admission/Application Essay
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