Cost is a crucial aspect, and it facilitates realization of defined results in verifiable and objective amount. The matching of this accounting concept is usually facilitated in order to ensure that there is an accomplishment of radical goals within the depreciation expense parameters. Lump sum purchases should be treated in a way that plant’s asset useful life is well analyzed in a way that reflects all the revenues imperatively in the income statement (Tsuji & Fujibayashi, 2011). Purchases that the organization exercises should be subjected in going concern assumption. This is in order to ensure that there is attainment and realization of integral goals as per the laid down accounting and finance principles and policies in the organization. Revenue recognition principle in many scenarios usually limits an organization from reflecting on mechanisms of holding any asset from the plant. Cost principle should be differentiated in various ways in accordance to the equipments in the organization (Tsuji & Fujibayashi, 2011). 2 Factoring is an important approach in every organization cash flow spheres. Company management can opt to sell all its accounts receivable to the third party at a discounted manner for the sake of exchanging money. The third party in this case is usually any financial institution or bank. The third party which purchases all accounts receivable has to remain significant and resourceful in order for all the transactions to be viable and beneficial. Receivable factoring has been posited as a simple commercial financing (Khazeh & Winder, 2006). When a company chooses a given option the management needs to articulate on analysis of the important factor. There are various factors that should be reviewed routinely accounts receivables. Accounts receivable needs to articulate on measures on how a company can convert cash on hand. Most business entrepreneurs have business ideas that turn accounts receivables into cash (Khazeh & Winder, 2006). There are various types of reasons through which company implements receivables in its accounting books. Therefore, it is usually looked as an effective asset to investors and investors. Organizations articulate on ways through which accounts receivables can be converted into cash without causing problems to business progress. Organizations have been articulating on various types of conversion that are used for implemented balance sheet. Managers in these organizations always analyze receivables in comparison with small business owners (Khazeh & Winder, 2006). 3 A contingent liability has been a potential liability, and it wholly depends on a future event that occurs. In accounting and finance, a contingent liability and loss are usually recorded through the use of journal entry approach especially where contingency is estimated and probable. There are three examples of contingent liabilities known as the lawsuits that are filed against a company, warranty of the organization and guarantee of another party’s loan (Colquitt, McCullough & Sommer, 2011). Circumstances whereby a liability and also related contingency are possible (not probable) a journal entry for the event is usually not required. Disclosure is not required in this case scenario. In approaches whereby a contingent liability has been proved to be remote, both the disclosure and the journal are not required in the accounting activity. A
Finance and Accounting Name University Course Lecturer 13th April 2012 1 Cost principle is usually used in acquisitions, plant assets that include lump sum purchases. A firm is usually allocated resources in terms of fair value of all its existing assets (Net of all the liabilities) that are used in the whole transaction…
Thus the current and the non-current assets and liabilities of the company has been assessed so as to investigate on the valuation method thus adopted by the company. At time the valuation of the assets of the company gets inflated due to the method of valuation thus adopted by the company.
Problem 10: Ratio Calculations - Assume you are given the following relationships for the Brauer Corp.: Sales/total assets = 1.5X; ROA = 3%; ROE = 5%. Calculate Brauer's profit margin and debt ratio.
Problem 19: Current Ratio - The Petry Company has $1,312,500 in current assets and $525,000 in current liabilities.
Different accounting policies can provide different estimates of earnings therefore accounting profit is not only an arbitrary figure but also subjective in nature. Accounting income can also be misleading because of the fact that it can distort the figures like Earnings per share (EPS) due to its subjectivity.
Most developing countries concentrate on developing their banking system, who act as the transmitter between the savers and the ultimate consumers of this credit. The bank is considered as the legal means of providing lending and most attention is paid
Analyzing every transaction in relation to its effects on the accounts; this step requires that there have to be document showing an accounting transaction has occurred. That is the source document, which is the basis of an
existence of accounting records is to minimize or reduce the effect of principal-agent problem; its impact is reduced by measuring and close monitoring of the performance and reporting the results to parties concerned.
Financial accounting is a discipline which has evolved over
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