Financial Reporting and Analysis Essay Example | Topics and Well Written Essays - 1000 words - 3

Financial Reporting and Analysis - Essay Example This principle can also be termed as accrual basis accounting. c) Purchase for store equipment or office equipment for less than $25 are entered in miscellaneous expenses. The matching principle is followed here. Expenses and revenues have to be matched if it becomes reasonable to do so. Expenses should be recognized when a particular work or product contributes to revenue. It is not when the work is done or when the product is produced. Income is recognized the same way with the expenses whether it is earned, incurred and received or spent. Consistency is enhanced through this principle. f) Land purchased 15 years ago for $40500 and now worth $346 000 is still carried in the books at $40500 on the basis of the historical cost principle. Land is a long term asset and should be reported in the balance sheet at its purchase cost rather than its current market value. This principle is based It should be based on the cost of acqusation. The information provided by this principle is reliable although lacks relevance and that the reason why Debts and Securities are now being reported at their market values. g) Zero corporation reports the possible loss of $1 million after it was sued for breach of contract in accordance with the principle of full disclosure. This principle ensures that all the important financial information is fully included in financial statements. This principle is important since it ensures that a company reflects even negative information and also highlighting positive impacts (Gibson, 2008). When the financial statements are audited, an opinion is expressed, the opinion of the auditor should be expressed on the opinion that generally accepted accounting principles are followed and applied on the basis of consistency as they were applied in the preceding year (Ramos, 2006). Unqualified opinion –this type of an opinion has no financial statements