Reasonable accuracy, Accounting Basics

Some the other concepts, as for example: the Matching concept, the Dual Aspect concept and the Realization concept are discussed in further sections, and as they have not been taken up currently.

Whereas going by all these concepts, possibly you may have developed a feeling about them sometimes conflict along with each other. You are correct. We illustrate this through considering several of these concepts in the context of valuation of business properties. Assume a firm needed a piece of land in 1985 for a price of Rs. 6, 00,000. Factory premises were constructed in the year 1986, and operations commenced in the year 1987. The firm has been successful in attaining the desired profit for the previous year. The Balance Sheet as a statement of assets and liabilities for the year 2005 is being arranged and 'Land' is needed to be valued. The estimated recent market price of this land is Rs. 60,00,000.

Must you recommend such the land be valued on Rs. 60 lakhs? The answer is 'no', clearly. Land would be continued on the Balance Sheet at its original cost is Rs. 6,00,000 merely. This decision is supported through several of the concepts discussed in this topic. In the first put, the stability of purchasing power of money shown in the money measurement concept prevents us by recognizing accretion in values as an outcome of changing price levels. After that, the realization concept will not permit unrealized profits to be involved providing land is held through the company and not sold away. You may notice the continuity or going concern concept creates any possible market value of land irrelevant for the balance sheet since the firm has to continue in business and land will be required by it for its own use. In such connection, this could be argued that if land were demonstrated on the balance sheet at its estimated current market value, the owner might choose to discontinue the business, sell the land and leave. The principle of objectivity is here initiated in the argument. This can be easily seen as in a situation like this the cost of acquisition of land at Rs. 6,00,000 in the year 1985 is the objective fact as it is depends on a transaction that in fact took place and this objective evidence is able of being verified. In contrast, the estimation of current market value figure might be suspect. This raises many questions. Do you comprise a market quotation for an equal plot of land? Has a similar plot of land been sold currently, and can we pick it up as demonstrable evidence of the current market price? This may be implies as even if market price for an equal plot of land is not obtainable, estimates via an accredited value may be accepted like demonstrable evidence of the market price. Further complications may be observed if buildings and services have been erected upon the plot of land. Is this possible to evaluate the value of land without factory buildings and the other facilities constructed on it? The answer is clearly 'no', and the conservatism concept will then put off you from accepting an estimate of market value as it cannot be ascertained along with reasonable accuracy.

Posted Date: 4/3/2013 6:00:14 AM | Location : United States







Related Discussions:- Reasonable accuracy, Assignment Help, Ask Question on Reasonable accuracy, Get Answer, Expert's Help, Reasonable accuracy Discussions

Write discussion on Reasonable accuracy
Your posts are moderated
Related Questions
the Dwyer corporation incurred costs of 114000 in purchasing a process which it eventually had patented. The patent was issued on July 20x1. To secure the patent, an additional 6

State the classified balance sheet ASSETS Current Assets are cash and any other assets which are expected to be realized in cash, sold, used up or expire within one year.

The Dividends account increases (debited) as well as an asset cash decreases (credited) by USD 3000. Transaction 15 brings to a close the analysis of the Micro Train Company transa

When a not-for-profit facility receives a contribution from a member of the community, the cost of the capital is inconsequential when deciding how to use the contribution, becau

exploration costs for mining companies are assts

The analysis focused primarily on the role, structure and funding arrangements for the International Accounting Standards Board (IASB), an entity that has been responsible for majo

Q. What is Posting reference column? This column demonstrates the account number of the debited or credited account. For example in Exhibit 8 the number 100 in the first entry

DEFINE THE FICA TAX PAYABLE AND SUTA TAX PAYABLE FICA TAX PAYABLE-OASDI. Same account is used to record both employees' and the employer's share. Credited to record taxes i

hi my name is harpreet kaur. I need help for my assignment, how can I contact you? and how much time take to make one assignment?

Draw a stem-and-leaf plot for the data set. (Enter numbers from smallest to largest separated by spaces. Enter NONE for stems with no values.) Data set A: The annual wages of emp