Watts (2003) Conservatism in Accounting Part I: Explanations and Implications Paper Review ACCT 3040 Advanced Accounting Theory and Practice Mr Terry Harris Conservatism is one of the fundamental principles of accounting and its application in financial accounting has recently become a highly controversial issue involving a variety of views as there is a desire for financial accounting information to be neutral. Conservatism has lasted in the accounting practice for many years and has
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Requirement 1 Match each of the following accounting concepts or principles to the correct description: cost principle, entity concept, faithful representation principle, going-concern concept, and stable monetary unit concept. Description | Accounting Concept/Principle | Jones ensures that the information contained in the financial records of the business is complete, neutral, and free from material errors. | Faithful Representation Principle | All transactions entered into the financial
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resources of the organization to most effectively carry out the plans that have been established. Decision making is when the financial manager makes choices among available alternatives. Generally Accepted Accounting Principles General accepted accounting principles (GAAP) are the accounting rules used to prepare and standardize the reporting of financial statements, such as balance sheets, income statements and cash flow statements. GAAP-based income is measured so that the information provided
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FINANCIAL NUMBER GAME The game has many different names and takes on many different forms Classification of creative accounting practice Reward of the game Label for the financial number game Creative accounting practices Any and all steps to play the financial numbers game, including the aggressive choice and application of accounting principles, fraudulent financial reporting, and any steps taken toward earnings management or income smoothing. Income smoothing A form of earning
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| | | | | | | | | | | | | (A) We have studied several methods of revenue recognition. Define and describe each of the following methods of revenue recognition, and indicate whether each is in accordance with generally accepted accounting principles. | | Point of Sale - is when the sale has occurred. You will recognize the sale at delivery, in the time period the product switched hands. This is GAAP apporved. | | | | | | | | Completion of production - is when the product is done
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Financial Restatement The financial statement of Green Mountain Coffee Roasters, Inc. is required to be restated due to several errors in accounting practices. The first error was an overstatement of $7.6 million in inventory over one quarter which accounted for a pre-tax income higher than actual. (Vending Market Watch, 2011) This accounting principle violated was either LIFO, FIFO or average cost as the inventory as the error was a result of an overstatement of consolidated inventory and an
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not successful. GAAP are guidelines and rules that are set for all accountants to follow to provide relevant, reliable, and accurate financial information. GAAP supports using a tax code for the IRS and states. “Without generally accepted accounting principles,
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balance sheet is a statement that presents an organized array of assets, liabilities, and shareholders’ equity at a point in time. It is a freeze frame or snapshot picture of financial position at the end of a particular day marking the end of an accounting period. Question 3-2 The balance sheet does not portray the market value of the entity (number of common stock shares outstanding multiplied by price per share) for a number of reasons. Most assets are not reported at fair value, but
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Chapter 8 Segment and Interim Reporting Chapter Outline I. FASB Accounting Standards Codification Topic 280, Segment Reporting (FASB ASC 280), provides current guidance on segment reporting. A. ASC 280 follows a management approach in which segments are based on the way that management disaggregates the enterprise for making operating decisions; these are referred to as operating segments. B. Operating segments are components of an enterprise which meet three criteria.
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settled. According to "Accountancy Students" (2012), ‘IAS 12 requires the tax effects of the tax-book basis differences of all assets and liabilities generally be presented as deferred tax assets and liabilities as at the date of acquisition’ (Accounting for Business Combinations : Deferred Tax Aspects). Temporary difference s could be a differed tax liability in the debit balances of financial statement compared with the tax written value. The deductible temporary differences are in
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