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Essay / Research Paper Abstract
This 3 page paper is written in 2 parts. The first part defines several terms; GAAP, historic cost, the difference between accrual basis and cash basis accounting and what are meant by current and non current assets and liabilities. The second part of the paper looks at three sets of accounts and considers the way that they are presented. The bibliography cites 4 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEacct001.rtf
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Unformatted sample text from the term paper:
in the way that this can be undertaken, some of which is at the discretion of the company. In order to understand accounts it is necessary to understand some of
the basic principles. A. Generally Accepted Accounting Principles, also known as GAAP, are a set of standards which have been set by the financial accounting standards board (FASB), they are
made up of rules, conventions, standards and procedures and lay down a rules based approach to the way that the accounts are prepared. These are used to determine the different
ways that reporting and transactions are treated and presented in the accounts and aim to give the accounts that are prepared a degree of uniformity. B. The concept of historical
cost in accounting may be seen as a foundation on which many accounts are still based despite the problems that it may cause and the constraints it imposes. Quiet simply,
this is the concept that states financial statement items are based on the original cost of that item. The cost is then depreciated over a period of time over which
the asset is useful. The use of historical cost can be used with the matching convention where the cost id then divided by the period over which it is creating
revenue. For some items the historic cost is not a suitable measure. For example, buildings and real estate may increase in value, and assets such as hedging tools can fluctuate
widely and need to be revalued. C. Accrual Basis vs. Cash Basis Accounting. The difference in these two methods of accounting is when items of revenue and expense are recorded.
Where accrual accounting is used the revenues are recorded as they are earned and the costs as they are incurred. Accrual basis is the approach that is required for most
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