Earlier in Part A, the basic principles of classification of accounts have been discussed.This article relates to the readers the various advantages of having designed a proper set of classified accounts. Advantages of a properly designed classification of accounts: It facilitates the recording of business transactions by the provision of suitable and self-defined ledger accounts; … Read more
Classification is a very important step when designing an efficient accounting system. Append below are some basic principles used in the classification of Accounts:- Basic Principles In The Classification Of Accounts The classification should be governed by the form in which financial and operating statements are to be presented Each ledger account should be … Read more
Some Good Features of An Efficient Accounting System 1 The accounting system should be in tailor made to the particular business or industry for which it is designed and not vice versa 2 It should provide for the complete integration of costing and financial records. Wherever possible, have an integrated system rather than one which … Read more
Valuation Of Goodwill By The Arbitrary Assessment Method In this Arbitrary Assessment Method either the purchaser or seller or both parties may estimate the value to be placed on the goodwill This method normally applies in situations where the profits cannot be used as a guide to future profit like in cases where: No profits … Read more
Definition Or What is A Trial Balance A list/statement/worksheet of all the account balances of the general ledger at a particular point in time from which the Income Statement and Balance Sheet of a business is drawn up. It is prepared in each financial period as a summary of the closing of the previous ledger … Read more
Exclusion From Consolidation Under IAS 27 A parent company is exempted from presenting consolidated financial statements where it is: (a) a wholly owned subsidiary; or (b) a virtually wholly owned subsidiary and it obtains the approval of the owners of the minority interest not to present consolidated financial statements. A virtually-own subsidiary is one in … Read more
Definition Of Control Under IAS 27 1. IAS 27 defines control as “ the power to govern the financial and operating policies of an enterprise so as to derive benefits from its activities” 2. Control is presumed to exist when the investor owns, directly or indirectly more than one half of the voting power of … Read more
Definition Of Subsidiary Companies Act defines a subsidiary company as one: (a) in which the investor company (i) controls the composition of the board of directors of the investee company; (ii) controls more than one half of the voting power of the investee company; or (iii) holds more than one half of the issued shared … Read more
Goodwill depends on many factors like: the nature/type of the business, the type of customer which such a business is inherently likely to attract, the expenditure already made in advertisements & promotions establishing the business, the reputation existing and the probabilities of the market. [As described earlier, goodwill consists of the advantages a business has … Read more