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本文主要从accounting conventions and approaches分析，由指导留学生论文中心策划组提供。是英文语种、Accounting研究方向、不需要数据处理的英国本科课程论文，不需要盲审（博士或硕士生有这个需要），如有需求请联系本站论文购买中心或者提交相关文章的指导需求。 accounting conventions and approaches In order to get the exact financial outcomes of firms, many accounting conventions and approaches have been developed. I'll use some proper numerical examples to describe and explain the accounting concept which are about prepayments, accruals and bad debts. Clearly shows that they are how to record and deal with the profit and loss account and balance sheet. ‘Prepayments means the prepaid expense in advance which will benefit the future accounting period and appear as an asset in balance sheet in the current accounting period’ (Atrill & McLaney 2006, pp.74-96). The ‘prepayments’ concept is related to the going concern convention, the materiality convention and the accounting period. Users of financial reports need information periodically. While financial information can be divided on timely basis, the activities of a firm cannot. Many transactions happened in the current period but they benefit the future period. The ‘prepayments’ is the best example, the cash has been paid but the services or goods will be received in the future. For example, considering the materiality and matching convention, there are two different states of prepayments recorded and treated in the profit and loss account and balance sheet. For one case, at the end of an accounting period, there is a bill of £15 for employees’ lunch paid during the current period. Since the amounts are too small to affect decision making, it can be treated as an expense in the current period. Then it will appear on the profit and loss account rather than the balance sheet, which will reduce £15 profit of the current period. ‘For another case, there is a bill of £5000 prepaid for office rent of the next accounting period. Although it was paid in the current, the benefits of this transaction will achieve in the future. Since the amounts involved are material, this bill will be treated as a current asset on the balance sheet rather than the profit and loss account, it will not do effect on the profit of the current accounting period’ (Atrill & McLaney 2006, pp.74-96). ‘Accruals means an accounting entity has received the goods or services but the cash is not paid. So cash payable are called accruals, which are treated as a current liabilities in balance sheet’ (Atrill & McLaney 2006, pp.72-90). ‘Because of the cash flow movement and some business rules, the occurrence of economic events and transactions is not always accompanied by the cash payment’( Chan & Lee & Lin 2009, pp. 189-206 ). While prepayment means prepaid before goods or services received, accrual means paid after transactions. As a result, prepayment are regarded as an asset which is listed on the left side of the balance sheet, in contrast, accruals are regarded as a liability which is listed on the right side of the balance sheet. For example, accruals comes from goods and services received before cash payment. Since it is usually paid within 12 months, it is classified into current liability. For example, a firm should pay a counselor £50,000 for his management service. In the first, after the counselor provides his service, there still £5,000 payable, which is called accruals. It will be reported on the balance sheet as liability and the profit of the current period will reduce £50,000. In the other case, the consulting fees are paid off when the counselor provides his service, the profit of current period will reduce as well but there is no accrual as a current liability on the balance sheet. ‘Bad debts mean written off the amount of receivables which result from goods sold or services provided. The matching convention requires the bad debts written off should match with the period of the sale’ (Atrill & McLaney 2006, pp.89-96). Bad debts concept is related to the matching convention and the prudence convention. Business often sells goods on credit. The accruals accounting requires recognize revenues and the prudence convention requires written off bad debts. ‘Bad debts means preparation for the receivable which cannot be fully repaid. It will reduce the profit by recognizing more expenses rather than reduct revenues directly’ (Dennis 2008, pp. 260-271). For instance, recognizing bad debts involves judgment, which should ensure the information comparable since bad debts will affect the profit obviously. For example, a company written £100 off the £50,000 receivable in the current period. The both its assets and profits will reduce £100 because of decreasing in receivable and an extra expense. In the future, when £50,000 repaid, both the asset and profit will gain £100. From the whole perspective of the two periods, the total profit is the same, but the information is more prudent. Furthermore, the approach of written off should be scientific and stable, otherwise the profit will be volatile greatly. When the goods and services receiving are not keeping pace with cash payment, the recognition of revenues and expenses becomes complicated. All of them affect the profit of the firm and the balance sheet, especially bad debts, it works on profit at least two periods. As a result, in recognition of revenues and expenses, accountants should always focus on the matching convention and accruals accounting.
Chan, A. & Lee, E. & Lin, S. (2009), ‘The impact of accounting information quality on the mispricing of accruals: The case of FRS3 in the UK’, Journal of Accounting and Public Policy, Vol. 28, 3, pp. 189-206.http://www.ukassignment.org/dxygassignment/2012/0807/19676.html
Dennis, I. (2008), ‘A conceptual enquiry into the concept of a ‘principles-based’ accounting standard’, The British Accounting Review, Vol. 40, 3, pp. 260-271. |
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