Fundamentals of Accounting



Fundamentals of Accounting

This paper will be answering to the questions that are mentioned. There are total six questions that are answered below:

Question 1:

Present in AppendixQuestion 2:Bedrock of Accounting Information

Recognition and measurement in financial statements include two accounting concepts that have been described as 'part of the bedrock of accounting', namely the accruals concept and Going Concern assumption, respectively. Accounting concepts can be defined as broad basic assumptions which underlie the periodic financial accounts of business enterprises.

The going concern assumption is described as follows: the information provided by financial statements is usually most relevant if prepared on the hypothesis that the entity is to continue in operational existence for the foreseeable future. The implication of this is that assets will normally be valued, and shown in the balance sheet, at their historical cost. The accruals concept is described as follows: the non-cash effects of transactions and other events should be reflected, as far as is possible, in the financial statements for the accounting period in which they occur, and not, for example, in the period in which any cash involved is received or paid.

Qualitative factor of Accounting Information

This introduction is an accounting primer to explain the basic concepts of accounting, its structure, standards and definitions. The need to review these concepts is greater now then ever. On one hand, popular accounting programs for small and mid-sized businesses have become more widely used than ever before, and on the other hand, industry consolidation has significantly reduced the accounting program choices to just a handful. Concepts Statement 2 examines the qualitative characteristics that make accounting information useful, and the FASB has gone to considerable effort to lay out what usefulness means. Usefulness for making investment, credit, and similar decisions is the most important quality in its “Hierarchy of Accounting Qualities”.  Usefulness is a high-level abstraction. To serve as a meaningful criterion or standard against which to judge the results of financial accounting, usefulness needs to be made more concrete and specific by analyzing it into its components at lower levels of abstraction. The two primary components of usefulness are relevance and reliability. While those concepts are more concrete than usefulness, they are still quite abstract. That is why Concepts Statement 2 focuses at a still more concrete level, where the concepts of predictive value and feedback value, timeliness, representational faithfulness, verifiability, neutrality, and comparability together serve as criteria for determining information's usefulness (Accounting Standards Committee, 1988).

For accounting standards setting, usefulness cannot be interpreted to mean whatever a particular individual interprets it to mean. A judgment that a piece of information is useful must be the result of a careful analysis that confirms first that the information possesses the qualities at the most concrete level of the hierarchy.

Question 3:

Present in Appendix

Question 4:

Four financial statements those are present in the set of company reports (Romney & Paul, 2009):

Financial position at the end of the period (Balance Sheet): Representing the Consolidated liabilities, equity and assets structure of the company at the end of financial ...