Purpose Of Accounting Essays

Purpose Of Accounting Essays-30
If an oversight organization, such as the Securities and Exchange Commission (SEC) or the Financial Accounting Standards Board (FASB) sets forth a guideline that addresses the same topic as the accounting convention, the accounting convention is no longer applicable.Accounting conservatism may be applied to inventory valuation.They are sometimes loosely explained, presenting companies and their accountants with the opportunity to potentially bend or manipulate them to their advantage.

If an oversight organization, such as the Securities and Exchange Commission (SEC) or the Financial Accounting Standards Board (FASB) sets forth a guideline that addresses the same topic as the accounting convention, the accounting convention is no longer applicable.

For example, my father owned a grocery store and he needed someone to help him with the many inventory calculations.This means book value can sometimes be less than market value.For example, if a building costs ,000 when it is purchased, it should remain on the books at ,000, regardless of whether it is worth more now.Basically, they are designed to promote consistency and help accountants overcome practical problems that can arise when preparing financial statements.Accounting is full of assumptions, concepts, standards, and conventions.Providing a standardized methodology makes it easier for investors to compare financial results of different firms, such as competing ones operating in the same sector.That said, accounting conventions are by no means flawless.At first, he was doubtful about entrusting me with the important responsibility, but I assured him that I was competent at completing the task.Within a few weeks, he knew that he could trust me to be accurate with the numbers that I was calculating.However, if a litigation claim is expected to be lost, an estimated economic impact is required in the notes to the financial statements.Contingent liabilities such as royalty payments or unearned revenue are to be disclosed, too.

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