FIN621 GDB 1 Solution and Discussion

zaasmi

Re: FIN621 GDB 1 Solution and Discussion

Total Marks 10
Starting Date Tuesday, June 02, 2020
Closing Date Monday, June 08, 2020
Status Open
Question Title Accounting Principles
Question Description

Accounting Principles

Learning outcome: After attempting this activity, students will be able to understand the concept of “Accounting Principles”.

Background:

Identify the accounting principle(s) applicable to each of the following situations:

ABC Company owns a photocopy shop, a food court and provides tax consultancy service. The financial statements of each business are prepared separately.
Any equipment purchased for less than Rs. 3,000 is considered as miscellaneous expense.
For valuation of inventory the company uses lower of cost or market value.
Land purchased 15 years ago amounting to Rs. 10 million is now worth Rs. 50 million. However, in the books of account it is still reported as Rs. 10 million.

Important Instructions:

Post your GDB comments (answer) against GDB # 01 rather than against lessons’ MDB.
Your discussion must be based on logical reasoning and to the point. Avoid irrelevant discussion and unnecessary information
Do not copy or exchange your answer with other students.  Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.
Books, websites and other reading material may be consulted before posting your comments; but copying or reproducing the text from books, websites and other reading materials is strictly prohibited. Such comments will be marked as Zero (0) even if you provide references.
Obnoxious or ignoble answer should be strictly avoided.
Questions/queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB.

For Detailed Instructions, please read the GDB # 01 announcement.

zaasmi

@Aqsa-Farhat You’r welcome

Aqsa Farhat

thanks a lot zaasmi

zaasmi

@zaasmi said in FIN621 GDB 1 Solution and Discussion:

Land purchased 15 years ago amounting to Rs. 10 million is now worth Rs. 50 million. However, in the books of account it is still reported as Rs. 10 million.

Cost Principle of Accounting
The cost Principle is an accounting principle that records assets at flab respective cash amounts to the time the asset was pin:based or aaaied. The amount of the asset that is recorded nay not be increased for improvements it market vale or illation, nor cant be updated to reflect any depreciation.
For example, a business buys a building worth Rs.10,000 in cash. In accounting records, the value of the budding ail be entered at its cost price, i.e. Rs.10,000. After four years, the value of the budding goes up to Rs. 5,00,000. However, the accounting records would continue to show the value of the budding at the cost price of Rs.10,000 less depreciation.

zaasmi

@zaasmi said in FIN621 GDB 1 Solution and Discussion:

For valuation of inventory the company uses lower of cost or market value.

Conservatism Principle of Accounting
The conservatism principle is the general concept of recognizing expenses and liabilities as soon as possible when there is tmcertainty about the outcome, but to only recognize revenues and assets when they are assured of being received.
The conservatism principle is the foundation for the lower of cost or market rule, which states that you should record inventory at the lower of either its acquisition cost or its current market value.

zaasmi

@zaasmi said in FIN621 GDB 1 Solution and Discussion:

Any equipment purchased for less than Rs. 3,000 is considered as miscellaneous expense.

Full Disclosure principle of Accounting
Under this concept as situations, circumstances and events that are relevant to financial statement is needed to be disclosed In other words, all of a company’s financial records and transactions have to be available for viewing.

zaasmi

@zaasmi said in FIN621 GDB 1 Solution and Discussion:

ABC Company owns a photocopy shop, a food court and provides tax consultancy service. The financial statements of each business are prepared separately.

Entity principle of Accounting
The business mdity concept states that the transactions associated with a business most be separately recorded from those of its ommers or other businesses or we can say that under this concept, the entity must record all transactions separately from its owner or owner’s other business. Without this concept the records of multiple entities would be intermingled, making it quite difficult to discern the financial or taxable results of a single business.

Aqsa Farhat

tomorrow is the last date of fin 621 GDB Question Title Accounting Principles if anyone has solution kindly share with me

Aqsa Farhat

@zaasmi is that solution of fin 621 gdb ?

Aqsa Farhat

thank you please do before last date

zaasmi

@zaasmi said in FIN621 GDB 1 Solution and Discussion:

For valuation of inventory the company uses lower of cost or market value.

The lower of cost or market rule states that a business must record the cost of inventory at whichever cost is lower – the original cost or its current market price. … Net realizable value is defined as the estimated selling price, minus estimated costs of completion and disposal.