Explain How the Fundamental Accoungting Concepts Are Used in Preparing Financial Statement
LSC BABS
SEMESTER 2
Business Accouting
Mr S. Palan
FINANCE ACCOUNGTING
ASSIGNMENT 1.Explain how the fundamental accoungting concepts are used in preparing financial statement. Use examples to illustrate the application of the fundamental accounting concepts. Accouting is the language of business and it is used to communicate finance information. In order for that information make sencse, accouting is based on 10 fundamental concepts. These fundamental concepts then form the basic for all of the Generally Accepted Accouting Principles (GAAP). And these are 10 fundamental concepts:the Business Entity Concept, Monetary Concept, Historical (Cost) Concept, Going Concern Concept, Dual Aspect Concept, Accrual Concept, The relisation Concept, Consevatism, Consistency, Materially In those fundamental accounting concepts above which I would apply and explain for 6 fundamantal accouting concept below which I think they are used in preparing the Financial Statements: 1.Going concern: -According to Dyson (2006) The going concern concept implies that the business will continue to operate for the fore-seeable future. It means that it is considered sensible to keep to the use of the historical cost concept when arriving at the valuation of assets. And if the business decides to liquidate or become bankrupt then a different approach to valuation is required. -This value includes the liquidation value of a company's tangible assets as well as the present value of its intangible assets (such as goodwill). The going-concern value is worked into the purchase price of a company, and is the main reason why the purchase price of a company tends to be higher than the current value of the assets of the company. For example, the liquidation value of Widget Corp. is $10 million. This sum represents the current value of inventory, buildings and other tangible assets that can be sold assuming that the company is completely liquidated.
SEMESTER 2
Business Accouting
Mr S. Palan
FINANCE ACCOUNGTING
ASSIGNMENT 1.Explain how the fundamental accoungting concepts are used in preparing financial statement. Use examples to illustrate the application of the fundamental accounting concepts. Accouting is the language of business and it is used to communicate finance information. In order for that information make sencse, accouting is based on 10 fundamental concepts. These fundamental concepts then form the basic for all of the Generally Accepted Accouting Principles (GAAP). And these are 10 fundamental concepts:the Business Entity Concept, Monetary Concept, Historical (Cost) Concept, Going Concern Concept, Dual Aspect Concept, Accrual Concept, The relisation Concept, Consevatism, Consistency, Materially In those fundamental accounting concepts above which I would apply and explain for 6 fundamantal accouting concept below which I think they are used in preparing the Financial Statements: 1.Going concern: -According to Dyson (2006) The going concern concept implies that the business will continue to operate for the fore-seeable future. It means that it is considered sensible to keep to the use of the historical cost concept when arriving at the valuation of assets. And if the business decides to liquidate or become bankrupt then a different approach to valuation is required. -This value includes the liquidation value of a company's tangible assets as well as the present value of its intangible assets (such as goodwill). The going-concern value is worked into the purchase price of a company, and is the main reason why the purchase price of a company tends to be higher than the current value of the assets of the company. For example, the liquidation value of Widget Corp. is $10 million. This sum represents the current value of inventory, buildings and other tangible assets that can be sold assuming that the company is completely liquidated.
References: Blackwood T (1998), Acouting for Business (2nd), Business education Pulishers Limited, Great Britan, Chapter 2 Accounting Principles pp18-22. Britton A and Waterston C (2003), Financial Accouting (3rd), Financial Accouting, Prentice Hall, England 4 Concepts and Characterristics p50-52. Bibiography: M W E GLAUTIER and B Underdown (2001), Accouting Theory and Practice, (7th edn), Prentice Hall. Dyson , J.R ( 2004 ) Accounting for non – accounting students ( 6th edn ) , Prentice Hall, Alexander , D and Nobes (2002) , Financial accounting ,(2nd edn), Prentice H Atrill P and McLaney (2000),Accounting and Finance for Non-Specialists (1st edn) Prentice Hall. Drury C (2003), Management Accounting for Business Decisions (3rd), Thompson. Cooke R A (2002), Finance for non finacial Manangers (2nd), Prentice Hall.