Describe the accounting concept that would be relevant when deciding on how to account for a transaction that involves an owner of a business taking inventory for his own use.
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‘If a business invests in shares, and the market value of the shares increases above cost then, until and unless the business sells them, no profit is made. If the business invests in inventory for resale, and the market value of the inventory falls below cost then the loss is recognized even though no sale has taken place.’
‘If a business undertakes an intensive advertising campaign which will probably result in increased sales (and profit) in succeeding years it will nevertheless usually write off the cost of the campaign in the year in which it is incurred.’
Required
Explain the reasoning behind the application of accounting principles in situations such as these and discuss the effect on the usefulness of accounting information in relation to users’ needs. (ACCA)
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Explain the nature and functions of financial accounting.
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a. Describe the recording and control function of financial accounting.
b. Explain the role of financial accounting with regard to the presentation of final financial statements.
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In which statement will the following appear, and under which heading will it be included?
a.Furniture and fixtures;
b.Rent;
c.Wages
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