Answer To: Part A: Computerise Bean’s Coffee’s Accounts on MYOB & Prepare End of the Year Financial Reports...
David answered on Nov 30 2019
Basic principle of Accounting:
1. Economic entity Assumption: The economic entity assumption states that the company’s entity is different and it cannot be combined with the owner’s entity. All the business owner’s personal transaction are separate from the business transactions.
2. Monetary unit assumption: All the economic activity is are expressed in the dollars AUD. All the transactions which does not have monetary unit are not recorded.
3. Going concern principle: It assumes that company has a long life and it will continue it operations for a long time
4. Matching principle: The accounting principle requires that the financials should be done on the accrual basis of accounting. It states that the revenues must match up with the expenses.
5. Revenue recognition principle: The revenue must be recognized when incurred irrespective whether the cash against the same has been received or not.
If the business owner intends to change the depreciation to reduce its expenses then it would result in breach of two principles i.e. conservatism and consistency. Under the consistency principle, it I important that the company follows one method over a period of time, so as to follow the consistency.
As per the conservatism principle, the should choose the method which will result in less net income and if the company changes the depreciation method to reduce its expenses, it will increase its net income
Going concern principle states that the business will continue. The assets are used for the operations of the company and reflects the use over a long period of time, which states the reason for the going concern principle
No, the owner is not correct. The statements needs to be reported under the accrual basis of accounting under which all the expenses and revenues pertaining to the period needs to reported whether they are paid or not. If the company does not mention the unpaid wages then it violates the matching principles as well as the accrual basis accounting.
Accrual concept of accounting states that the company needs to report all the revenues and expenses pertaining to a particular period whether the cash transaction against the same has incurred or not. Example: The services has been rendered but the cash against the same has not been received. Under the accrual basis of accounting, the revenue will reported irrespective the...