Accounting : CHAPTER THREE

It is often given in return for bulk purchase orders. Trade Discounts – Trade discounts is a reduction in the catalogue price of an article, given by a wholesaler or manufacturer to a retailer. In an accounting trade discounts are recorded in only to the day books, its not transfer to journal. When you trade via a barter exchange, you trade for “points” through a third-party organization. A Liability is a present obligation as a result of a past event, the settlement of which will result into an outflow from the entity of resources embodying economic benefits. An asset is a resource controlled by the business entity as a result of a past event, from which future economic benefits are expected to flow to the entity. “You get what you pay for” is so engrained in business owners’ minds that they cringe at the thought of using free tools. For information to be reliable, it should be free from biasness, errors and must be complete. The financial statements should be free from biasness. The financial statements should be compared through time and should be compared with different business entities within the same industry.

To enhance comparability, the business entity must adopt the same accounting policies in each year they are reporting. JCH Company conducts business in the lumber and building products industry. The third consequence of incorporation is that the company acquires the capacity to sue or be sued in its own name. In 2002 the SIC changed its name to the International Financial Reporting Interpretations Committee (IFRIC). Analysis of economic events, recording financial information, summarizing and reporting financial information, and assisting in decisions based on the financial information presented. At first this technique of recording was carried out generally to analyze the financial status of a business. Errors of commission are where the bookkeepers make a mistake in carrying out his or her task of recording transaction in the accounts. An error of principle involves making a double entry in the belief that the transaction is being entered in the correct accounts, but subsequently finding out that the accounting entry breaks the rule of an accounting principle or concept.

It sets out the concepts that underlie financial statements for external users. If the business entity has that intention or necessity to liquidate, the FS should be prepared on realization method and the method should be disclosed in the notes to the financial statements. You can, instead, spend your time in strategizing new business ideas that will help your business to flourish. A number of individuals attempt their hands in the bookkeeping side of their business, and actually they need to give a significant time. Buying a piece of bookkeeping software written on spreadsheets can thus become an essential tool for the business. Accounting software will permit Joe to generate the financial statements and other reports that he will need for running his business. It’s the framework for the preparation and presentation of Financial Statements. This is in accordance with IAS 8 Accounting Policies, which are the principles, conventions, bases, rules and practices business entities use in the preparation and presentation of financial statements. Capital is the amount invested in the business by the owners. Expenses are decrease in economic benefits during the accounting period in form of outflows, depletion of assets or incurrence of liabilities resulting to decrease in equity other than distribution made to the owners of the entity.

Equity is the residual interest of the assets of the entity after deducting all its liabilities. We need also to think about what information in particular is of interest to the members of each class. Income is the increase in economic benefits during the accounting period in the form of inflows, enhancement of assets or reduction in liabilities resulting to increase in equity other than those relating to the contribution by the members. D. When production decreases, total fixed costs increase. Increase in economic benefits from the ordinary activities of the business which qualify to be an income. These business accounting software could be of various types depending upon differing needs of various organizations. Accountants are found in private and public companies, nonprofit organizations and government agencies. Managerial accountants do not face ethical issues. Whenever they face complex and non-programmed problems they cannot take a decision due to limited authority.