Question 1: Proficient: Discuss the effects of four of the five major accounting assumptions on the accounting process. The effects of the five major accounting assumptions that affect the accounting process are; 1. Business entity - the business entity assumes the data collected in an accounting system relates to a specific business. The Business entity concept assumes each business existence is separate from its owners, creditors’, employees, interested parties and other businesses. Under the business entity premise, the data collected is strictly about the business and not the owner. There are other forms of entities within the a corporations. For example, companies like Toyota or Ford Motors, may have several different legal entities for reporting purposes but the corporation may be consider as one business entity because they have common ownership. 2. Going-concern assumption believes a business will continue to operate unless strong evidence suggests the entity will end. The termination of an entity happens when a company crease business operations and sell it assets. Going-concern assumption is no longer valid, if a business appears likely to liquidate. Accountants often cite this assumption to justify use using actual cost rather than market cost to measure assets. 3. Money measurement relates to measuring the business economic activities in monetary terms like dollars instead of using physical terms like inches, grams, or feet. Using a common monetary unit allow accountants to report economic activities in a consistent manner. Without monetary units, it would be impossible to add things like building, equipment, and inventory to the balance sheet. Financial statements reports in monetary units to allow users to make val... ... middle of paper ... ... be the number one seller and generate revenues in excess of $500 million dollars. The company also has a patent suit that it believes it will lose for $20 million dollars. According to conservatism principles, it suggests the company report the contingent liability in the footnotes on the company’s financial statement. References Averkamp, H. (2014, January 1). Accounting Principles | Explanation | AccountingCoach. AccountingCoach.com. Retrieved May 2, 2014, from http://www.accountingcoach.com/accounting-principles/explanation Hermanson, R., Edwards, J., & Maher, M. (2010).Accounting principles: A business perspective. (Vol. 2). Textbook Equity inc. DOI: www.textbookequity.com Siegel Ph.D. CPA, Joel G.; Shim Ph.D., Jae K. (2010-02-01). Dictionary of Accounting Terms (Barron's Dictionary of Accounting Terms) (p. 129). Barron's Educational Series. Kindle Edition.
Reimers, Jane L. (2003). Financial Accounting A Business Process Application. Upper Saddle River, New Jersey, Prentice Hall.
Siegel Ph.D. CPA, Joel G.; Shim Ph.D., Jae K. (2010-02-01). Dictionary of Accounting Terms (Barron's Dictionary of Accounting Terms) (p. 129). Barron's Educational Series. Kindle Edition.
Wolk, H., Dodd, J., & Tearney, M. (2003). Accounting Theory: Conceptual Issues in a Political and Economic Environment (6th edition ed.). South-Western College Pub.
Siegel Ph.D. CPA, Joel G.; Shim Ph.D., Jae K. (2010-02-01). Dictionary of Accounting Terms (Barron's Dictionary of Accounting Terms) (p. 129). Barron's Educational Series. Kindle Edition.
Marshall, D., McManus, W., & Viele, D. (2004). Accounting, what the numbers mean. 6th ed. New York: McGraw Hill Irwin.
Accrual basis of accounting- If in the Framework of IFRS they can satisfy the definition and recognition criteria than the entity shall acknowledge items as assets, liabilities, equity, income and expenses.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial accounting (6th ed.). Hoboken, NJ: Wiley.
Jackson, S., Sawyers, R., & Jenkins, J. (2009). Managerial Accounting (5th ed.). Fort Worth, TX: Harcourt College Publishers.
Gibson, C. H. (2011). Financial reporting & analysis: Using financial accounting information. (12th ed.). Mason, OH: South-Western Cengage Learning.
Weygandt, Kimmel, and Kieso (2008). Financial Accounting: A Focus on Fundamentals. John Wiley and Sons Inc.
The definition of key terms that follow are commonly used terms by accounting professionals and experts in the accounting industry that are not commonly known, used, and/or understood by the general populace. Some of the following definitions used by the accounting industry, in particular auditors, hold different meanings and thus are clarified below, as related to their application in this study.
Marshall, M.H., McManus, W.W., Viele, V.F. (2003). Accounting: What the Numbers Mean. 6th ed. New York: McGraw-Hill Companies.
Schipper, K 1989, ‘Commentary on Earnings Management’, Accounting Horizons, Vol September, pp. 91-103, retrieved 2nd January 2014, EBSCOHost database.
The business entity concept is the accounting records reflect the financial activities of a specific corporate entity. It is separate from its owners, for example stockholders, managers or the proprietor, that means business can own assets, have liabilities and enter into business transaction. In other words, in the point of view of Generally Accepted Accounting Principles (GAAP), the owner and the business are two separate entities. Besides that, partnership and corporations are also should be accounted for separately. For example
The success of a company is very dependent upon its financial accounting. In accounting there are numerous Regulatory bodies that govern the accounting world. These companies are extremely important to a company because they set the standards when it comes to the language and decision making of a company. These regulatory bodies can be structured as agencies, associations, commissions, and boards. Without companies like the Security and Exchange Commission (SEC), The Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB), Internal Accounting Standards Board (IASB), Internal Revenue Service (IRS), and other regulatory bodies a company could not make well informed decisions. In this paper the author will look at only four of them.