Archive about 'Accounting Basics,Principles & Concepts'

In Accounting, Explain What Is Recoverable Amount

Recoverable amount is the HIGHER of the:

Fair value less those expenses relating to the disposal/sale of the asset and
Value in use of an asset

A simple illustration:
Company XYZ has a plant & machinery which has a fair value of $100,000 and estimate that the costs to [...]

What are the Accounting Treatment and give examples of Non-Adjusting Events After The Balance Sheet Date

(a)    For non-adjusting events, no adjustments are made to the amounts recognized in the financial statements. However the following disclosure should be provided namely (i) nature of the event  and (ii) estimate of the financial effect , or a statement that such an estimate cannot be made. Note that non-disclosure could affect the ability of [...]

Please Explain What Are The Underlying Accounting Principles That At Least Need To Be Follow When Presenting Financial Statements under FRS 101

Under FRS 101 ( Presentation of Financial Statements) it stipulates the minimum underlying accounting principles when presenting the financial statements:

Going concern- refer article
Accrual basis of accounting-refer article
Consistency of presentation- refer article
Materiality and aggregation – Each [...]

WHAT ARE THE UNDERLYING ASSUMPTIONS AND CONSTRAINTS IN THE PREPARATION OF THE FINANCIAL STATEMENT. ALSO EXPLAIN WHAT ARE THE DIFFERENCE BETWEEN ACCOUNTING POLICIES AND ACCOUNTING PRINCIPLES.

When preparing and presenting the financial statements, there is a common understanding of the underlying assumptions and constraints.
Underlying assumptions are those principles, concepts or practice that entities  are assumed to apply when preparing the company’s financial statement which are as follows:

Accrual basis which requires transactions and events to be recognized when they occur. The revenue [...]

WHAT IS FAIR VALUE ACCOUNTING, ITS USEFULNESS AND LIMITATION

Question:
 I understood historical cost accounting but what is fair value accounting. How useful or how is fair value accounting been justified and are there any limitations when accounting experts use such accounting basis?
 

Answer:
 (a) What is fair value accounting:-

Fair value accounting is a financial measurement methodology permitted by accounting standards which allows companies to measure [...]

Questions (with Answers) On True Or False On Accounting Concepts & Double Entry System

 

QUESTIONS ( click here for ANSWER)

True

False

1.

Accounting Principle is general law or rule followed in the preparation of financial statements

 

 

2.

Usefulness, objectivity and feasibility are the three basic norms generally found in accounting principles

 

 

3.

The entity concept considers the business and the proprietor as distinct from each other

 

 

4.

In accountancy, all business transactions are recorded as having dual aspect

 

 

5.

It [...]

Answers To Questions on True Or False-Accounting Concepts

QUESTIONS on ACCOUNTING CONCEPTS & DOUBLE ENTRY SYSTEM

True

False

1.

Accounting Principle is general law or rule followed in the preparation of financial statements

X

2.

Usefulness, objectivity and feasibility are the three basic norms generally found in accounting principles

X

3.

The entity concept considers the business and [...]

Cash Versus Accrual Accounting.

Earlier articles describe both the accrual concept and profit versus cash concept.
Append below is a simple test to understand the cash versus accrual accounting.

Jim Co is a consulting company which have the following revenue and expenses for the month of October 2008

 

The company earned $10,000 but received only $8,000 in cash

Expenses were as follows

(i)  Rent [...]

Difference/Distinction Between Profit And Loss Account And Income And Expenditure Account

Append below are the main differences/distinction between:
 

Profit And Loss Account

Income And Expenditure Account

Prepare by business undertakings

Prepared by non-trading organizations

Credit balance of this account is known as “Net profit” and added to opening capital

Credit balance is known as “excess of income over expenditure or surplus” and added to opening capital fund

Debit balance of this account is [...]

Difference/Distinction Between Receipts And Payments Accounts And Income And Expenditure Account

Append below are the main differences/distinction between:
 

Receipts & Payments Account

Income & Expenditure Account

Receipts are shown on debit side and payment shown on credit side

Expenses are shown on debit side and Incomes are shown on credit side

Starts with the opening balance of cash in hand and at bank

It has no opening balance

Only cash transactions takes [...]