Introduction to Accounting - AAS1 Essay Example | Topics and Well Written Essays - 1000 words

Introduction to score - AAS1 - Essay ExampleThere is a significant relationship exist between gross and expense. The companion incurs expenses to generate revenue so, the matching principle states that all the expenses that were incurred in a period to generate revenue should be subtracted from the revenue of the same period for the purpose of computation of the net income (Nikolai, et al., 2010). Going Concern fantasy Going concern is also a key concept accounting that assumes that the association go out deal its operation for a foreseeable future. This important assumption is made because the amount of time, the company allow widen its business can non be predicted (Carl, 2011). IAS 1 states that if the company has serious threats to going concern they must be adequately disclosed in the financial statements and if the management concludes that the entity is not going concern the financial statements should not be prepared on going concern assumption. Business Rates In the previous year the company paid total amount of ?9,600 on account of business rates, in the two equal initiations of ?4,800 each. forthwith if the rates for the preeminences are higher by 5% in the current year, the total amount of the bill get out be ?10,080 (9,600*1.05) making it ?5,040 each installment. First installment has already been paid and the second installment is due in December 2012. The business is liable to pay this amount, so it should be save as current liability in the balance sheet and an equal amount of expense shall be go intoed in the income statement according to the matching principle. Following journal entry will be demand to record this transaction on accrual basis exposition Debit Credit Profit & red ink Account 5,040 Rates payable 5,040 Credit Sales If the attribute sales are made, the transaction will be recorded on accrual. The business is entitled to record the sales even if the payment will be relieved next year. In case of credit sale follow ing entry is required. Description Debit Credit Account Receivable XXX Revenue XXX If 120 days credit is allowed there are certain chances that the business will be able to obtain much revenue. However, this is not good for the business to have that extended credit limits. In this situation it is reasonable to offer discounts to the customers to advertise them to make early payments. With this discount policy the company will be able to generate more business as well as there are chances of quick recovery from the customers. Stock rating Stock is one of the most valuable pluss of the business. Its look upon is determined with the guidelines provided by IAS 2 Inventories, which prescribes that the inventories should be measures at lower of cost or net realizable value (NRV) (IASB, 2011). In this case the original value of the stock was ?25,000 and due to the flood there was a major damage to it. Now the company believes that it will be able to obtain only ?8,000 from the same st ock items. The value of the inventory should be cut to ?8,000 and a loss of ?17,000 should be charged to profit and loss account. Following journal entry shall record the effect of this incident Description Debit Credit Profit & Loss Account 17,000 Inventories 17,000 dispraise Depreciation is a method of allocating cost of the tangible long term asset over its useful life. IAS 16 Property, Plant & Equipments requires that every asset should be depreciated over its useful life, so depreciating every asset is essential in order to meet the requirement of the international accounting standards. IAS 16