ATAR Notes: Forum
VCE Stuff => VCE Business Studies => VCE Subjects + Help => VCE Accounting => Topic started by: costargh on February 03, 2008, 01:09:11 pm
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I just typed up some definitions of Accounting Principles & Qualitative Characteristics.
I am asking for help with editing these definitions so that they are the best that they can be so I can print them out and stick them on my wall.
Please highlight editing of them with bolding. Thanks
Accounting Principles
Entity
The business is assumed to be separate from the owner and other businesses, and its records should be kept on this basis.
Going Concern
The life of the business is assumed to be continuous, and its records are kept on that basis.
Reporting Period
The life of the business must be divided into periods to allow reports to be prepared, and the accounting records should reflect the Reporting period in which a transaction occurred. Reports must be made at least every 12 months (to comply with ATO regulations)
Historical Cost
Transactions should be recorded at their original cost (purchase price) or value, as this value is verifiable by reference to the source document.
Conservatism
Losses should be recorded when probable, but gains only when certain so that liabilities and expenses are not understated and assets and revenues are not overstated.
Consistency
Accounting methods should be applied in a consistent manner to ensure that reports are comparable between periods
Monetary Unit
All items must be recorded and reported in the currency of location.
Qualitative Characteristics
Relevance
Relevance states that reports should include all information that is useful for decision-making and exclude information that is not.
Reliability
Reliability states that reports should contain information that is free from bias, and thus can be relied upon for its accuracy.
Comparability
Comparability states that reports should be comparable over time and between companies, through the use of consistent accounting procedures
Understandability
Understandability states that reports should be presented in a manner that makes it easy for users to comprehend their meaning.
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Excellent work, Costa! :)
The only thing I could say is that for Reporting Period the MAXIMUM period to prepare reports is 12months (due to ATO regulation).
Also for Historical Cost, it's better to put purchase price/value rather than original value :) [CONDITION: The business entity must have purchased the asset itself. The definition is void if the owner of the enterprise has transferred the asset to the business, then it should be NRV]
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Oh ok. Thanks Prav. Ill make some adjustments now.
I can see why you should put purchase price rather than original value (may be misinterpreted)
Thanks. Any other recommendations of change would be GREATLY appreciated.
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It looks good to me. Haha i was wondering how i was going to define reliability characteristic without using the word 'reliable'. i know how to now! XP
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These are some good definitions. What's important is to also be able to apply these to situations, as this is what will most likely be recquired in a test or exam.
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Can a mod please check the link or authenticity of the link? lol I dont want to download a virus haha
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This guy got 99.90. Authenticity enough?
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Geez could have done better LOL. I was just being cautious dan. geeez
Just checked them out. Great definitons thankyou
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Hey, Costa. You can also check the AASB, (Australian Accounting Standards Board) and summarising that would be excellent :)
(that's what I did, except it was from a Uni Book that extracted the AASB qualitative principles and characteristics)
Oh yeah, I may have mentioned this but NEVER regurgitate a definition for an exam question. Just use the Identify, Define and Link approach to answer the question while picking the relevant part of the definition. :)
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just fixed up some english in my accounting definitions, not much. I deleted my previous post to which enwiabe commented: "This guy got 99.90. Authenticity enough?"
hello friends...
I finished VCE last year, got 49 in accounting (should've got 50, 2 marks in first exam taken off incorrectly and 1 mark in second taken off incorrectly [i have purchased my exams and looked over them...]) I have attached the BEST DEFINITIONS EVER. They have been given to Daniel Levy (the creator of freestudynotes) along with all of my other accounting notes which will soon be officially put on the site... enjoy!!
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nice work guys, keep the notes going!
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Also for Historical Cost, it's better to put purchase price/value rather than original value :)
As indicated by source documents maybe?
EDIT: Just read costa already said this, soz
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Quote from: AppleXY on February 03, 2008, 04:29:15 PM
Also for Historical Cost, it's better to put purchase price/value rather than original value
As indicated by source documents maybe?
Interestingly, in some cases it isn't "better to put PURCHASE price/value rather than original value".
For instance, if an owner of a business contributes a car to the business three years after he purchased it (as a separate entity), the capital contribution must be at the VALUE of the car when the business (as a separate entity to the owner) acquired it.
e.g. 1st Jan 2006, owner buys car for $30,000. 1st Jan 2009 owner contributes car to business. The car must be valued at its ESTIMATED RESIDUAL VALUE (amount that the car could be sold for on the 1st Jan 2009).
This satisfies the relevance principle as the value of the car when it is acquired is more relevant to the business for decision making than the value of the car when a separate entity purchased it.
i have these kinds of situations written in my notes which i have given to enwiabe to post as "free study notes". They should be up soon.
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True. I should state the condition that it's only purchase price if the business entity bought it. Albeit the special cases, it's usually the purchase price.