lecture-3---accruals---student-資料下載頁
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【正文】 ion is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements. ? Application: – Important figures cannot be missed out. 35 Money measurement ? The measurement of financial results in money terms. ? Application: – Things which cannot be valued in money terms are not included in the accounts. 36 Periodicity ? The preparation of financial statements for a set period of time, usually one year (not necessarily the calendar year). ? Application: – SOFP at a particular date – Ine statement for an accounting period 37 Prudence ? The process of exercising caution in the production of financial statements, being cautious and expecting less favourable outes. ? Application: – Recording losses in full as soon as they arise. 38 Prudence Bad Debts ? Risk of trading on credit with customers: some customers will not or will be unable to pay ? Such non payments are known as bad debts ? Bad debts are NOT deducted from sales ? Bad debts are deducted from trade receivables and added to administrative expenses in the ine statement ? Objective proof that a debt is bad is needed before any bad debt can be recognized 39 Doubtful Debts ? Trade receivables that may not be collected rather than bad debts which will definitely not pay ? An application of the prudence principle, being cautious and avoiding overoptimistic expectations ? Calculated as a % of trade receivables ? The full provision is deducted from trade receivables at each year end ? The change in the provision for doubtful debts is charged to the ine statement each year 40 Realisation ? Profits should not be anticipated until they have been earned through a sale. ? Application: – A sale needs to be backed by both an order and a transfer of goods or services to the customer. 41 Summary Accounting conventions are the rules that accountants work with in preparing financial statements. Going concern and accrual basis are the underlying assumptions. Other conventions include: dual aspect, materiality, money measurement, periodicity, prudence, realisation 42
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