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Essay / Research Paper Abstract
This 4 page paper considers the influences on the preparation of annual accunts. The first part of the paper examines the use of the historical cost convention, how it is used the advantages and disadvantages of its’ use. The second part of the paper look at the role of the investor or shareholder as the defined users, and how the account may be different if other stakeholder groups were the defined users. The bibliography cites 12 sources.
Page Count:
14 pages (~225 words per page)
File: TS14_TEannual.rtf
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Unformatted sample text from the term paper:
convention and the idea that the primary user and the defined beneficiary is the annual accounts is the shareholders. These basic foundations of the accounts may be seen as
fundamental in the preparation of the annual accounts. The Historical Cost Convention Using this convention the recorded transaction value will be the amount that was recorded at the
time the transaction took place (Elliott and Elliott, 1998). When accounts are prepared on a solid and reliable basis this gives a foundation on which agency agreements can be based
with a known level of certainty due to the more objective nature of historical costing (Page, 1992). This means that different stakeholders, not only the shareholders, but also others that
have an interest in the financial performance and potential of the company, such as lenders and suppliers, can look at the accounts knowing that there has not been any level
of manipulation (Elliott and Elliott, 1998, Page, 1992). Where there are figures recorded that are at transaction levels there is a danger thy may have been manipulated by either the
directors or pressure from the directors onto valuers, such as surveyors. This is a useful measure, especially when there is an assessment of the underlying value of the company,
there my be values, especially for long term asset, which may b out of date, but they are reliable for the date on which they were recorded. For example, when
loans are taken out with a lender there may be the need that gearing will not exceed a preset level (Elliott and Elliott, 1998). This is also a concept
that is important in the operational accounting, with any payments made or invoices issued recorded at the level of the transaction, and as such the accounts ma be verifiable against
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