achieving future cash flows. Limitations * Companies omit items that cannot be measured reliably. * Income is affected by the accounting methods employed. * Income measurement involves judgment. Earnings Quality Companies have incentives to manage income to
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earnings quality since net income does not representatively portray the economic performance of the business entity for the period. Income smoothing relies not on falsehoods and distortions but on the wide leeway existing in alternatively accepted accounting principles and their interpretations. It is conducted within the structure of gaap. In effect‚ it redistributes income statement credits and charges among periods. The prime objective is to moderate income variability over the years by shifting
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with planning) TOPIC: Discuss positive accounting theory and contrast it with normative accounting theory. Provide examples where appropriate. The purpose of this essay is to provide an overview of positive accounting theory (PAT) and highlight how this theory differs to normative accounting theory. Definitions and assumptions of both theories will be considered and examples of the theories will be provided. In addition specific theories related to PAT namely agency and the efficient
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Question 3: Paragraph 81 states that if the amount of consideration to which an entity will be entitled is variable‚ the cumulative amount of revenue the entity recognizes to date should not exceed the amount to which the entity is reasonably assured to be entitled. An entity is reasonably assured to be entitled to the amount allocated to satisfied performance obligations only if the entity has experience with similar performance obligations and that experience is predictive of the amount of consideration
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I have read and understood the penalties involved if I do not abide by the rules outlined on the back of this examination paper. Student Signature: Student ID Number Course: Subject Area: Catalog Number: Paper Number: Component: Theory of Accounting ACCT 29083 1 ALL Components Duration: Perusal Time: Lecturer: Moderator: 180 minutes 15 minutes Sheikh Rahman (FBI) Stacey Cowan Restrictions: Closed Book Contact Number: Contact Number: (03) 8662 0810 (07) 4150
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Following is an income statement calculated based on the different equity theories of accounting. Entity Theory Proprietary Theory Orthodox Unorthodox Residual Equity Theory Revenues $ 1‚000‚000 $ 1‚000‚000 $ 1‚000‚000 $ 1‚000‚000 Less: Operating Expenses Cost of goods sold $400‚000 $400‚000 $400‚000 $400‚000 Depreciation $100‚000 $100‚000 $100‚000 $100‚000 Salaries and Wages $200‚000 $200‚000 $200‚000 $200‚000
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The Importance of Accounting Theory to the Field Of Accounting The objective of theory is to explain and predict. One of the basic goals of the theory of a particular discipline is to have a well-defined body of knowledge that has been systematically accumulated‚ organized‚ and verified well enough to provide a frame of reference for future actions. The Webster’s definition of theory is the systematically organized knowledge‚ applicable in a relatively wide variety of circumstances‚ a system
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QUESTION 1 a. Outline the objective and the principles of a theory that prescribes fair value accounting. Fair value accounting is to measure selected assets at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The objective of fair value accounting is linked with the objective of ‘decision usefulness’ of general purpose financial reporting. That is‚ to provide relevant information that
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BKAF 3083 ACCOUNTING THEORY AND PRACTICE Individual Assignment 1 1. Explain 8 levels of conceptual framework Level | Elements | Explanation | 1.Border of discipline / authority | * Definition of financial reporting | It defines the financial record of the business activities. | 2. Subject | * Definition of the reporting entity | It defines the reporting entities where the users are dependent on their financial statements to make decision. | 3. Objective | * Objective | It is
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Accounting Standards Board University of Phoenix Accounting Theory and Research Jun 13‚ 2009 Accounting Standards Board To address the increasing challenges of legislating those governs our society today‚ “countries all over the world have begun to outsource rulemaking to bodies consisting of people familiar with the subject. For that reason‚ policymakers rely on private entities to establish financial accounting and reporting standards” (Donald Kieso‚ 2003‚ Intermediate Accounting). The
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