The accounting minor is available to students with any major from any college, including those in the College of Business Administration and Information Sciences. It should be emphasized to the students that the Board itself is likely to be the major user and thus the most direct beneficiary of the guidance provided by this pronouncement. Homer indicates that this pronouncement provides little, if any, guidance to the practicing professional in resolving accounting controversies. Homer Winslow and Jane Alexander are discussing various aspects of the FASB’s concepts statement on the objective of financial reporting. Indicate the basic objective established in the conceptual framework. The basic objective is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions about providing resources to the entity. Without some basic set of objectives that everyone can agree to, inconsistent standards will be developed. Only by establishing some consistent starting point can accounting ever achieve some underlying consistency in establishing accounting principles. Jane concedes this point but indicates that the objective is still needed to provide a starting point for the FASB in helping to improve financial reporting. What do you think is the meaning of Jane’s statement that the FASB needs a starting point to resolve accounting controversies?

He believes that the statement provides such broad guidelines that it would be impossible toapply the objective to present-day reporting problems. It follows that individuals who believe that accountability is the primary objective may arrive at different financial reporting standards than others who argue for prediction of cash flow. For example, some believe that accountability should be the primary objective of financial reporting. This assumption in accounting indicates that economic activity can be identified with a particular unit of accountability. This can make them better prepared to adapt depending on the environment and make sound business decisions at a management level. As the CEO, you need to make it very clear to the finance/accounting managers that you expect frank and honest information and that they will not be victims of “shoot the messenger” thinking. Consistency enhances comparisons between information about the same enterprise at two different points in time. Comparability enhances comparisons between information about two different enterprises at a particular point in time. Comparability means that information about enterprises has been prepared and presented in a similar manner. In order to facilitate comparability between enterprises, the use of only one accepted account-ing method for a particular type of transaction could be required.

The cost flows of process costing follow the exact same order as that of job costing, but the direct costs and factory overhead are harder to match to the units of continuous production. The financial statements are not shown in comparison with amounts from other years. However, I think that basing an investment decision on these financial statements would be unwise because they are neither relevant nor representationally faithful. The type of costs required in capital investment decisions differ from those required for accounting purposes because only future costs are relevant for such decisions. An increase in capital expenditure is recorded or debited to a non-current asset account, which eventually finds its resting place in the statement of financial position. This represents the total cost that a manufacturing firm incurs in the production process and is transferred to the Comprehensive Income Statement for that accounting period. Listed here are the total costs associated with the 2013 production of 1,000 drum sets manufactured by DrumBeat.

Note to instructor: There are a multitude of answers possible here. In this case, there appears to be a high uncertainty that the company will have to pay. The Association established the Journal of Accountancy as a means of professional communication and published a terminology of accounting in 1915. Consolidated financial statements have been published in the USA since the end of the nineteenth century. Record these transactions in a Journal. However, they would not be as free from error as historical cost information about past transactions. Representational faithfulness is correspondence or agreement between accounting information and the economic phenomena it is intended to represent stemming from completeness, neutrality, and free from error. 58,000 of income, the free file alliance provides tax preparation software for free. The use of cloud accounting software will make comfortable your tedious bookkeeping process. However, if adopted, they would impair consistency and make trend comparisons of an enterprise’s results over time difficult or impossible.