Kế toán, kiểm toán - Chapter 4: Limitations of accounting reports

Chapter 4 Limitations of accounting reports1 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by ObjectivesExplain the term ‘generally accepted accounting principles’.Explain the effects of the following accounting principles on the measurement of assets, revenues and expenses:historical costmonetary unitgoing concernaccounting periodconservatism.2 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Accounting principles and GAAPsThe term ‘generally accepted accountingprinciples’ (GAAPs) is used to refer to allaccounting conventions and concepts.3 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Accounting principles and GAAPs (continued)GAAPs: are not legally bindingthe key premise of accounting implementationthe foundation of the preparation of financial reportsattain to get consensus on the application of key accounting issues.4 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Historical costAssets to be reported in the Statement of Financial Position are shown at the price for that asset.All transactions are recorded and reported at the original cost.Historical cost recording allows transactions to be verified.5 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Monetary unitTransactions of a business are recorded in the monetary unit of the country in which it is operating.All items are recorded in a common base.The monetary units allows comparisons to be made between items and between periods.The monetary unit provides a common measuring stick.6 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Going concern conventionAssumes the business will continue to operate in the future.The financial records are prepared on the assumption the business will be ongoing.There is linkage between the going concern convention and the historical cost convention.7 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Accounting periodTransactions can be divided into significant accounting periods.Legislation states that statements need to be recorded yearly, ending 30 June XXXX.However, a business can report more frequently if desired. 8 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by ConservatismAccountants adopt a pessimistic approach in measuring revenues and expenses rather than an optimistic approach.This approach avoids the over-estimation of an item.9 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by