Bus3061week 4 Assignment Templateaccounting Theory Merchandising Acc ✓ Solved

BUS3061 Week 4 Assignment Template Accounting Theory & Merchandising Accounting Respond to the following 7 questions using grammatically correct language. Save the document and submit it in the courseroom. 1. Discuss the effects of all five major accounting assumptions on the accounting process. [Answer here] 2. Describe all five concepts' impact on the accounting process. [Answer here] 3.

GAAP set forth standards or methods for presenting financial accounting information. Describe all five major accounting principles. [Answer here] 4. In certain instances, companies do not strictly apply accounting principles because of modifying conventions or constraints. Identify and describe the impact on the accounting process of the three modifying conventions. [Answer here] 5. Correctly state the letter or letters of the principle(s), assumption(s), or concept(s) used to justify the accounting procedure followed for at least four of the accounting procedures.

These procedures are all correct. â–ª Principle(s), Assumption(s), Concept(s): A. Business entity. B. Conservatism. C.

Earning principle of revenue recognition. D. Going concern (continuity). E. Exchange-price (cost) principle.

F. Matching principle. G. Period cost (or principle of immediate recognition of expense). H.

Realization principle. I. Stable dollar assumption. â–ª Accounting Procedures: 1. Inventory is recorded at the lower of cost or market value. 2.

A truck purchased in January was reported at 80 percent of its cost even though its market value at year-end was only 70 percent of its cost. 3. The collection of ,000 of cash for services to be performed next year was reported as a current liability. 4. The president's salary was treated as an expense of the year even though he spent most of his time planning the next two years' activities.

5. No entry was made to record the company's receipt of an offer of 0,000 for land carried in its accounts at 5,000. 6. A supply of printed stationery, checks, and invoices with a cost of ,500 was treated as a current asset at year-end even though it had no value to others. 7.

A tract of land acquired for 0,000 was recorded at that price even though it was appraised at 0,000, and the company would have been willing to pay that amount. 8. The company paid and charged to expense the ,200 paid to Craig Nelson for rent of a truck owned by him. Craig Nelson is the sole stockholder of the company. [Answer here] Example: 1) Inventory is recorded at the lower of cost or market value. (C) 6. In each of the following equations supply the missing term(s): · Net sales = Gross sales - (______________________ + Sales returns and allowances). · Cost of goods sold = Beginning inventory + Net cost of purchases - ________ ________. · Gross margin = ________ ________ - Cost of goods sold. · Income from operations = __________ _________ - Operating expenses. · Net income = Income from operations + _________ ________ - ________ ________.

7. As part of the calculation for cost of goods sold it is necessary to determine the value of goods on hand, termed merchandise inventory. Accountants use two basic methods for determining the amount of merchandise inventory. Identify the two methods and describe the circumstances (including examples of users of each method) under which each method would be used. [Answer here] 1 3

Paper for above instructions

BUS3061 Week 4 Assignment: Accounting Theory & Merchandising Accounting
---
1. Effects of the Five Major Accounting Assumptions on the Accounting Process
Accounting assumptions are foundational concepts that underlie the accounting framework and guide financial reporting. The five major accounting assumptions include the Economic Entity Assumption, Monetary Unit Assumption, Time Period Assumption, Going Concern Assumption, and the Accrual Basis Assumption.
- Economic Entity Assumption: This principle states that the transactions of a business must be kept separate from the personal transactions of its owners. This assumption enhances accountability and ensures that financial statements reflect only the financial activities of the entity (Kieso, Weygandt, & Warfield, 2019).
- Monetary Unit Assumption: This assumption holds that transactions should be recorded in a stable currency, typically the currency of the country in which the business operates. This contributes to clarity and consistency in financial reporting, allowing stakeholders to easily understand the financial position of the business (Horngren, Sundem, & Elliott, 2013).
- Time Period Assumption: This assumption allows businesses to divide their financial statements into discrete reporting periods (like monthly, quarterly, or annually). This facilitates comparative analysis and timely decision-making (Schroeder, Clark, & Cathey, 2019).
- Going Concern Assumption: This principle assumes that a business will continue to operate indefinitely unless there is evidence to the contrary. This affects how assets and liabilities are valued and presented in financial statements (Stickney & Weil, 2019).
- Accrual Basis Assumption: This assumption recognizes revenues when earned and expenses when incurred, regardless of when cash is exchanged. This provides a more accurate picture of a company's financial performance and position (Weygandt, Kimmel, & Kieso, 2019).
---
2. Concepts Impacting the Accounting Process
The impact of key accounting concepts on the accounting process is significant:
- Revenues: The revenue recognition principle dictates when and how much revenue is recorded, significantly influencing an entity's reported income (Kieso et al., 2019).
- Expenses: The matching principle ensures that expenses are recorded in the period they help generate revenues, providing a clear relationship between costs and income (Horngren et al., 2013).
- Assets and Liabilities: The historical cost principle states that assets should be recorded at their cost of acquisition, impacting balance sheet values and influencing investment decisions (Schroeder et al., 2019).
- Equity: The equity concept explains how resources are financed, highlighting the relationship between debts and ownership, thus informing stakeholders of financial health (Stickney & Weil, 2019).
- Conservatism: This concept promotes prudence in financial reporting; revenue is not recognized until realized, and expenses and losses are recognized as soon as they are probable. This impacts risk assessment and resource allocation decisions (Weygandt et al., 2019).
---
3. The Five Major Accounting Principles
Generally Accepted Accounting Principles (GAAP) outlines fundamental accounting principles that govern financial reporting:
- Revenue Recognition Principle: Revenue should be recognized when it is earned and realizable, impacting how revenue streams are reported (Kieso et al., 2019).
- Matching Principle: This principle mandates that expenses be matched with revenues in the period they are incurred, facilitating accurate income reporting (Horngren et al., 2013).
- Cost Principle: Assets should be recorded at their original cost, which affects asset valuation and depreciation methods used over time (Schroeder et al., 2019).
- Full Disclosure Principle: All significant financial information must be disclosed in financial statements, giving stakeholders complete knowledge for decision-making (Stickney & Weil, 2019).
- Consistency Principle: Financial statements should be prepared using the same accounting methods year over year, ensuring comparability (Weygandt et al., 2019).
---
4. Impact of the Three Modifying Conventions
Modifying conventions provide flexibility in adhering to accounting principles in certain situations. The three main modifying conventions are:
- Materiality: This concept allows accounting practices to deviate from strict GAAP compliance when the amounts involved are not significant enough to impact users' decisions (Kieso et al., 2019).
- Conservatism: This convention encourages accounting methods that are less likely to overstate financial positions. For instance, losses are recognized sooner than gains (Horngren et al., 2013).
- Cost-Benefit: This principle suggests that the benefits of providing information must exceed the costs associated with gathering and reporting it, leading to decisions about what information to disclose (Schroeder et al., 2019).
---
5. Justifications of Accounting Procedures
- Inventory is recorded at the lower of cost or market value: (C) Conservatism.
- A truck purchased in January was reported at 80 percent of its cost even though its market value at year-end was only 70 percent of its cost: (F) Matching principle.
- The collection of ,000 of cash for services to be performed next year was reported as a current liability: (G) Period cost.
- The president's salary was treated as an expense of the year even though he spent most of his time planning the next two years' activities: (B) Conservatism.
---
6. Supply the Missing Terms
- Net sales = Gross sales - (Sales discounts + Sales returns and allowances).
- Cost of goods sold = Beginning inventory + Net cost of purchases - Ending inventory.
- Gross margin = Net sales - Cost of goods sold.
- Income from operations = Gross margin - Operating expenses.
- Net income = Income from operations + Other revenues - Other expenses.
---
7. Methods for Determining Merchandise Inventory
The two primary inventory valuation methods are:
- Periodic Inventory Method: This method involves periodically counting inventory and calculating COGS by subtracting the ending inventory from the sum of beginning inventory and purchases. This method is commonly used by smaller businesses or those with a less complex inventory (Horngren et al., 2013).
- Perpetual Inventory Method: This method continuously updates inventory records after each transaction. Retailers with high sales volumes, such as Walmart, typically use this approach to maintain real-time inventory levels (Kieso et al., 2019).
---
References
1. Horngren, C. T., Sundem, G. L., & Elliott, J. A. (2013). Introduction to Financial Accounting. Pearson.
2. Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting. Wiley.
3. Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2019). Financial Accounting Theory and Analysis: Text and Cases. Wiley.
4. Stickney, C. P., & Weil, R. L. (2019). Financial Accounting. Cengage Learning.
5. Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2019). Accounting Principles. Wiley.
This structured approach covers all aspects of the assignment questions while complying with academy standards.