3.Difference between non-current asset and current asset
Non-current asset can be named as Fixed-asset as well. While current asset is named as non-fixed asset. Non-current asset generally consist of net property, plant and equipment intangible assets such as goodwill and other asset. (Business Analysis and Valuation: Text and Cases By Krishna G. Palepu, Paul M. Healy, Victor Lewis Bernard)For current asset, it is an asset that is likely to be realized in, or is intended for sale or consumption in, entity’s normal operating cycle; it is held primarily for the purposed of being traded; it is expected to be realized within 12 months after the reporting period; it is cash or cash equivalent. Current assets are held with the intention
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5. Prudence concept
Prudence is the normal accounting practice to fully recognize losses as soon as they become apparent but not to recognize revenues until they are certain. In more recent times the prudence concept has become known as the ‘ realizations principle’ in that only gains that have been ‘realised’. Unrealised gains would not be recognized until the value is realized through its sale. (Financial and Accounting for business by Bob Ryan p.108)
Furthermore, it also prevails over the matching concept if the two conflict. For instance, the value of the prudence should be valued for the net realizable value instead of the market price. Where NRV is above cost, the profit likely to arise in the near future is ignored and stock remains in the accounts at the lower figure until the sale occurs. On the other hand, where NRV is below cost, stock must be immediately restated at the lower figure so that full provision is made for the foreseeable future loss.( Introduction to Accounting By Pru Marriott, J R Edwards, Howard J Mellett)
In addition, prudence is also the ethic duty that an accountant should obey and follow, where they should abbreviate, identify and induce the main facts of a business or an organisation. For instance, he/she should not overstate the asset figure by using market value or sales value in the balance sheet. He should provide the accumulated
According to AASB 116 Property, plant and equipment held beyond the normal operating cycle of entity are deemed to be non-current assets. Here’s the extract from the report.
25-7 If a loss cannot be accrued in the period when ti is probable that an asset had been impaired or a liability had been incurred because the amount of loss cannot be reasonable estimated, the loss shall be charged to the income of the period in which the loss can be reasonably estimated and shall not be charged retroactively to an earlier period. All estimated losses for loss contingencies shall be charged to income rather than charging some to income and others to retained earnings as prior period adjustments.”
Fixed assets are assets that will be held or used over a period longer than one year. Companies typically have land, equipment, and buildings as their fixed assets. The account is usually called property, plant, and equipment or PP&E.
The purpose of those conditions is to require accrual of losses when they are reasonably estimable and relate to the current or a prior period. Disclosure is preferable to accrual when a reasonable estimate of loss cannot be made. Further, even losses that are reasonably estimable shall not be accrued
The purpose of those conditions is to require accrual of losses when they are reasonably estimable and relate to the current or a prior period. Paragraphs
Accountants are held to a higher ethical standards and they must performed their duties in compliance with standards or ethical values of honesty, integrity, objectivity, due care, confidentiality, which must be fully committed to. They must put clients or public interest first before their own. They must have and ethical values and maintain those values way beyond what the society or the company’s code of ethic. It is important that accountants’ behavior or ethical values is in conformity with the
Accountants should always carry out the public responsibility, meaning they have a responsibility to ensure that the accounting functions are performed to the highest possible standards and the information which an organisation provides for its stakeholders is true and accurate. To reach the goal of improving the performance of accountants, there might be several steps to undertake. There should be on-going education to keep abreast with the existing and emerging
The three main events in the life of an asset are the acquisition, useful life, and disposal or retirement. At the end of an asset’s life, gain or loss of its disposal is recorded. A gain or loss will take place at the disposal of any assets and should be logged as journal entry along with any related incidental cost. The unrealized gains and losses are noticed according to its earnings. All changes whether upward or downward that involves investment shares are shown as income or losses with a change in market value that requires an adjustment to its carry value.
Ethics are crucial to the accounting profession and the business world, so choosing an ethics system to base your moral decisions on is extremely important. Accountants and all business professionals will be confronted with moral dilemmas on a daily basis. Being strong in your faith and knowing what you believe in will help you to always make the right decision. Based on this reasoning, this essay will explain why deontology is the best ethics system for the accounting profession.
The current assets are those which are readily convertible into cash and cash equivalents due to their highly liquid nature and also form part of working capital of the company’s operations. However, the long term assets in contrast are not liquid because since they have a useful life of more than a year and hence their full value cannot be easily realized within
Ethics in any industry is important, but for Accounting professionals and those in need of their services, it is a particularly stressed element. Information provided by accountants is used to make major decisions, including investing, downsizing, expanding, etc, so accountants are expected to be competent, reliable, and have a high degree of professional integrity. Because of these high expectations, the professional accountancy industry, like many other professions, has adopted professional codes of ethics (Woelfel, 1986). These ethical codes go above and beyond the requirements for state or federal laws and regulations. There are several professional organizations within the
Businesses, investors, creditors rely on accounting ethics. The accounting profession requires honesty, consistency with industry standards, and compliance with laws and regulations. The ethics increase the responsibility and integrity of accounting professionals, and public trust. The ethical requirements influence the management behavior and decision-making. The financial scandal of Enron and Arthur Anderson demonstrates the failure of fundamental ethical framework, such as off-balance sheet transactions, misrepresentation of financial statements, inaccurate disclosure, manipulations with earnings, etc. The confronted accounting profession and concern for ethics in businesses forced regulators to revise the conceptual framework of accounting processes.
The fair value of an asset is defined as ‘the price that would be received to sell an asset paid to transfer a liability in an orderly transaction between market participants at the measurement date” (Kieso, Weygandt, & Warfield, 2012). It is a market based measure (Averkamp, 2014). Over the past few years, Generally Accepted Accounting Principles has called for the use of fair value measurement in a company’s financial statements. This is what is referred to as the fair value principle (Kieso, Weygandt, & Warfield, 2012). The fair value of an asset or liability is based on an estimate of what the asset should be worth at the time of sale. This gives rise to some conflict among accounting professionals. It is believed that fair value may not be as accurate
Prudence concept is when a transaction is uncertain and therefore the profit is not recognised and unclear. If these sales are not completed, it could be a problem for the business organisation. This money will be recorded as bad debts in the profit and loss account.
Integrity – Accountants should always ensure that they are honest and straightforward in their activities with every instance that they have clients. They should always maintain the lines of duty and maintain business relationships during all official duties (Nobes, 2015).