1.
Question :
(TCO 2) A statement that reports inflows and outflows of cash during the accounting period in the categories of operations, investing, and financing, is called a(an):
Student Answer:
Income statement
Statement of retained earnings
Balance sheet
Statement of cash flows
Report of management Instructor Explanation:
Chapter 9
Points Received:
0 of 5 Comments:
Question 2.
Question :
(TCO 2) Two major methods of asset valuation are:
Student Answer:
historical cost and future cost
historical cost and acquisition cost
historical cost and replacement cost
acquisition cost and future cost Instructor Explanation:
Chapter 10
Points Received:
5 of 5 Comments:
…show more content…
Instructor Explanation:
The cash basis of accounting records revenues when cash is received and expenses when cash is paid out. The accrual basis of accounting records revenues when they are earned and expenses when resources are used.
Points Received:
5 of 5 Comments:
Question 6.
Question :
(TCO 2) What is an accounting entity?
Student Answer: An accounting entity can be either a business or subdivisions of a business that engages in economic activities, has economic assets and resources that must be accounted and is separate from the personal dealings of its owners. Instructor Explanation:
An accounting entity is an organization for which financial data are to be collected (separate and distinct from its owners).
Points Received:
5 of 5 Comments:
Question 7.
Question :
(TCO 2) The HC method, which uses unadjusted historical costs, does not take into account depreciation expenses, purchasing power, and unrealized gains in replacement value. Despite these weaknesses as a financial reporting method, the HC method is used more frequently for accounting purposes than other methods, such as the HC-GPL, CV, and CV-GPL methods. Why is this so?
Student Answer:
Instructor Explanation:
The HC method of reporting is regarded by many as the most objective method of accounting and is consistent with the accounting principles of cost valuation. It is and has been widely used and
Accounting is a business discipline that allows companies to record, analyze, and retrieve critical financial information that can be used to determine a company 's financial status. Its purpose is to help people understand what is going on financially within an organization provide reports and insights needed to make sound financial decisions.
When considering the use of cash basis accounting, it is important to understand the following advantages and disadvantages:
Accounting is the study of how businesses track their income and assets over time. Accountants engage in a wide variety of activities besides preparing financial statements and recording business transactions. These activities include computing costs and efficiency gains from new technologies, participating in strategies for mergers and acquisitions, quality management, developing and using information systems to track financial
Assess the degree to which the firm’s accounting reflects the underlying business reality. Identify accounting distortions and evaluate their impact on profits and the sustainability of profits.
Over the past several years, there has been a growing controversy over the accounting issues of fair values and historical cost. The basis of this controversy revolves around which one of these principles is the most accurate. There are many different viewpoints on this issue. Many accounting professionals believe that fair value is just as accurate as the historical cost principle, while others believe that the historical cost is more reliable. The facts about each of these valuation methods will be researched and explained throughout this research document, as well as the different viewpoint about which method is the most accurate and reliable.
An explanation of the accounting and business techniques that have been used, including a discussion of their limitations
The discussion takes place within the context of different bases of valuation—cash basis, historical cost, and current value. This discussion also helps the instructor to learn more about the students’ background and ability. Historical cost accounting is presented as a compromise between cash accounting (high reliability but low relevance) and current value accounting (low reliability but high relevance). The matching problem of historical cost accounting is illustrated, with specific reference to amortization and full cost v. successful efforts accounting in oil and gas.
Question: (TCO 2) Explain the difference between the accrual basis of accounting and the cash basis of accounting.?
Historical cost is the most common adopted measurement basis in the IASB; FASB suggests that market selling price (Fair Value) is more accurate description of how much assets and liabilities are currently reflected in financial reporting (SFAC 5, 2008). In other words, it was about the historical cost versus fair value. Historical cost gives priority to existing shareholders and regard stewardship as an important function of financial reporting (Whittington, 2008). Historical cost records actual transaction with supporting documents so the financial report is less subject to manipulation by management (Shortridge et al., 2006). The information is relevant to forecasting future cash flows within entity specific perspective rather than direct valuation of future cash flows. Historical cost accounting may lack relevance as during period of inflation (Pozen, 2009). The fact that relevant information has predictive value strengthens its decision making power over reliability principle (KAYA,
HP in 1994 decided not to integrate the ABC in the Cost Accounting Information System (abbreviated CAIS) for a number of reasons. The first reason is that at that time the CAIS was implemented in all HP business units worldwide. This system was considered very complex and difficult to change. Because ABC was only used in one business unit it was thought to be insensible to change the whole system. The second reason is connected to the codification of the operations in the CAIS. If the ABC would be integrated this system would have to be reorganized and all the employees would have to learn to operate the new
Cash receipts are reported for operating, financing and investing activities. Cash from operations includes cash that is obtained through daily business operations. Cash from investing is generated from investing in assets that produce a yield. This can include the sale of equipment, other businesses, or long-term assets. Cash from financing is cash that is received or paid due to borrowing practices. Dividends are also included in this section.
This income statement tells how much money a company has brought in (its revenues) how much it has spent (its expenses) and the difference between the two (its profit). The income statement show’s a company’s revenues and expenses over a specific time frame. This statement
Accounting can be defined in a number of ways, but I chose the book definition, which is; Accounting is an information system that provides reports to stakeholders about the economic activities and condition of business. The person in charge of accounting is called the accountant. The accountant is typically required to follow a set of rules and regulations. These rules and regulations are called the General Accepted Accounting Principles. Throughout these next few paragraphs, I will be giving you the history and evolution of accounting, and I will be explaining who the stakeholders are and what type of information they require, and I will be explaining the role of accounting in business. There will be many examples and type of business
Penman (2007) had stated that historical cost may provide useful margins on turnover for forecasting operating cash flows in a going concern business. On the other hand, when valuing a portfolio of marketable investments with fair value, it tends to be more reliable. Stakeholder of Woolworths includes investors, creditors, lenders and so forth, their needs of accounting information are different. Some of the investors are interested in the information using fair value approach for them to decide whether to buy or sell their shares, some of the lenders and creditors are interested in the current value of assets and liabilities of the entity to decide the ability of the entity to pay off a debt when due. Further, a particular stakeholder need more than one measurement approach to satisfy their needs of accounting information (e.g. considering to engage with Woolworths). Therefore, mixed measurement approach would be more appropriate to satisfy each stakeholder needs of accounting information (Rankin et al., 2012; Dvorakova, D., 2011).
The process of observing and providing the financial statistics of an organisation which is useful for customers for managing and to create economic decisions. “The process of identifying, measuring and communicating financial information about an entity to permit informed judgements and decisions by users of information.” (McLaney and Atrill, 2002:1). Accounting data is unbiased and neutral, which helps to determine the level of excellence and different factors that influence the company’s performance. This point has been explained clearer by (Ezzamel & Willmott, 2004:784) “ Accounting information is an impartial and neutral representation data, which is correctly used, can reduce unwanted ambiguities and can reduce waste in organizing supplies”. The three main financial statements are the balance sheets, the profit or loss account and the cash flow statement. Hence, with these types of