In some circumstances, such as when the purchase cost of a fixed asset is depreciated over several years, a systematic allocation of a cost across numerous reporting periods will be required. Record them simultaneously if revenue and certain expenses have a cause-and-effect relationship. Revenues and related expenses must be recognized under the same reporting period. If the cost of that item in the future cannot be identified as a benefit, it should be charged to the expense as soon as possible. If an item isn't directly related to revenue, it should be mentioned in the income statement in the prevailing accounting period in which it expires or is depleted. This is because the accrual basis of accounting and correcting entries is linked to the principle. This principle is one of the most crucial accounting concepts under the accrual basis of accounting. According to the matching principle, a corporation must disclose an expense on its income statement in the same period as the relevant revenues. brainmass.The matching concept is one of the most fundamental accounting principles. Do you believe that the concept of conservatism is consistent with the financial capital maintenance concept? Explain. (d) Do you believe that the concept of conservatism is consistent with the physical capital maintenance concept? Explain. (c) Do you believe that financial statements that recognize losses but not gains provide information that is relevant and representationally faithful? Explain. (b) Why do you believe conservatism has affected financial reporting? Explain. (An exception is current accounting for investments in securities having readily determinable fair values.) Stated differently, accountants tend to recognize holding losses but not holding gains. However, when the asset's value appreciates, its value is not written up to fair value. For example, when the value of an asset is impaired, it is written down to fair value an unrealized loss is recognized in the income statement. A major effect of conservatism is that accountants tend to recognize losses but not gains. The concept of conservation has been influential in the development of accounting theory and practice. (d) Give specific examples of how balance sheet measurements affect the measurement and reporting of earnings. (c) Describe and discuss the balance sheet approach and its importance to income reporting. (b) Give specific examples of how the matching concept is used in practice. (a) Describe and discuss the matching concept and its importance to income reporting. 5 definition of earnings represents a balance sheet approach to the measurement and report of revenues and expenses. 5 definition would flow through the income statement. Under this concept, asset and liabilities would be measured directly, and changes to them would flow through the income statement. 5 defined earnings as the change in net assets exclusive of investments by owners and distributions to owners, a capital maintenance concept of earnings measurement. The matching concept is therefore an income statement approach to the measurement and reporting of revenues and expenses. This concept implies that expenses should be measured directly, and thus balance sheet measure are residuals. The accounting profession has employed the matching concept to determine what to report in the income statement and to determine how to measure items reported in the income statement and to determine how to measure items reported in the income statement. This content was COPIED from - View the original, and get the already-completed solution here! Not what you're looking for? Search our solutions OR ask your own Custom question.
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