ACCOUNT OBJ:
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1.Control account used to record the balances on a
number of subsidiary accounts and to provide a cross-
check on them.
uses of control account
1. Check on the accuracy
2. Location of errors
3. For internal check
4. More Simply and Quickly
C.Limitations of accounting ratio
(1) Ratios are based on accounting figures given in the
financial statements. However, accounting figures are
themselves subject to deficiencies, approximations,
diversity in practice or even manipulation to some extent.
Therefore, ratios are not very helpful in drawing reliable
conclusions.
2) Ratios have inherent problem of comparability.
Companies otherwise similar may employ different
accounting methods, which can cause problems in
comparing certain key relationships. For example,
inventory turnover can be different for a company using
FIFO than for the other company using LIFO method of
inventory valuation.
3) Accounting ratios are not totally dependable and they
must be used after giving due weight- age to general
economic conditions, industry situation, position of firms
within the industry, mode of operations, size of firm,
diversity of product which can make the business
enterprises completely dissimilar and thus affect the
computation of accounting ratios.
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2a. Working capital is the amount of a company's current
assets minus the amount of its current liabilities.
2b. Capital employed, also known as funds employed, is
the total amount of capital used for the acquisition of
profits. It is the value of all the assets employed in a
business and can be calculated by adding fixed assets to
working capital or subtracting current liabilities from
total assets.
2c. A fixed asset is an item with a useful life greater than
one reporting period, and which exceeds an entity's
minimum capitalization limit .
2d. A current asset is cash and any other company asset
that will be turning to cash within one year from the date
shown in the heading of the company's balance sheet. (If
a company has an operating cycle that is longer than one
year, an asset that will turn to cash within the length of
its operating cycle is considered to be a current asset.)
2e. The rate of stock turnover is a measure of the
number of times inventory is sold or used in a time period
such as a year. The equation for inventory turnover
equals the cost of goods sold or net sales divided by the
average inventory.
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3a. The accrual concept in accounting means that
expenses and revenues are recorded in the period they
occur, whether or not cash is involved.
3b. The business entity concept states that the
transactions associated with a business must be
separately recorded from those of its owners or other
businesses. Doing so requires the use of separate
accounting records for the organization that completely
exclude the assets and liabilities of any other entity or
the owner.
3c. Dual Aspect Concept, also known as Duality Principle,
is a fundamental convention of accounting that
necessitates the recognition of all aspects of an
accounting transaction.
3d. PERIODICITY CONCEPT is the concept that each
accounting period has an economic activity associated
with it, and that the activity can be measured, accounted
for, and reported upon.
3e. The going concern principle is the assumption that an
entity will remain in business for the foreseeable future.
Conversely, this means the entity will not be forced to
halt operations and liquidate its assets in the near term
at what may be very low fire-sale prices.
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4a)
A company is a legal entity made up of an association of
persons, be they natural, legal, or a mixture of both, for
carrying on a commercial or industrial enterprise.
4bi) An ordinary share represents equity ownership in a
company proportionally with all other ordinary
shareholders, according to their percentage ownership in
the company. All other shares of a company's stock are,
by
definition , preferred shares
4b(ii)Preference shares, more commonly referred to as
preferred stock, are shares of a company's stock with
dividends that are paid out to shareholders before
common stock dividends are issued. If the company
enters bankruptcy, the shareholders with preferred stock
are entitled to be paid from company assets first.
4b(iii) A debenture is a type of debt instrument that is
not secured by physical assets or collateral.
Debentures are backed only by the general
creditworthiness and reputation of the issuer. Both
corporations and governments frequently issue this type
of bond to secure capital.
4b(iv) The authorised capital of a company (sometimes
referred to as the authorised share capital, registered
capital or nominal
capital, particularly in the United States) is the maximum
amount of share capital that the company is authorised
by its constitutional documents to issue (allocate) to
shareholders.
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Thursday, 8th September, 2016
Financial Accounting (Financial
Accounting Essay& Objective) 9.30
1.00pm
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