Understanding Accounting Elements and Valuation Criteria
5. Criteria for Registration or Recognition of Accounting Elements of Annual Accounts: Bookkeeping is the process by which the various elements entering into the asset balance are recognized. When should they be recognized? Likely when they are expected to provide future economic benefits or returns for the company. Liabilities are recognized when they mature, and it is necessary to distinguish a product that must be delivered or resources that will incorporate future economic benefits or income. Incomes and expenses are recognized as a consequence of an increase or decrease in the resources of the company.
6. Criteria of Valuation:
- Historical Cost: Acquisition price of an asset.
- Fair Value: The amount that may be obtained for an acquired asset or a liability settled between informed parties under conditions of mutual dependence.
- Net Realizable Value: The amount that can be obtained from the sale of an asset in the market, deducting necessary costs.
- Current Value: The present value of future expected cash flows.
- Amortized Cost: The amount by which an asset or liability was initially rated, adjusted for the main repayments and any impairment in value.
- Book Value: The amount at which an asset or liability is recorded in the balance sheet.
- Residual Value: The amount that the company believes it could obtain from the sale of an asset after deducting estimated costs.
- Effective Interest Rate: The discount rate that equals the book value with the estimated long-term cash flows.
4th Part: Definitions of Relations and Accounting:
- Group 1: Funding Basics: The firm’s own resources or long-term financing, usually intended to finance ongoing operations.
- Group 2: Fixed Assets: The heritage elements of the company intended for long-term use.
- Group 3: Stock: Goods and other supplies, including raw materials.
- Group 4: Debtors and Creditors: The effects of commercial and personal accounts that are active and passive sources within the financial accounts of the company.
- Group 5: Debts and Credits: Operations outside the company.
- Group 6: Purchasing and Traffic Charges: Procurement of raw materials, goods, and other properties acquired by the company.
- Group 7: Acquisition of Goods and Services: Subject to the provision of traffic patterns.
Part: Quadre 5th Accounts: This is a detailed and consolidated account of all the assets of the company, expressed in several subdivisions with a title that indicates the set.
Accounting: An economic science that studies business assets, the rules, and scientific principles underlying the recording of financial information of the company.
Business Heritage: The set of assets, rights, and obligations in relation to a company, currently in order to be used.
Balance Sheet: An inventory document that shows the assets of a company at a given time.
Profit and Loss Account: Accounting intended to calculate the results that a company has for a month, explaining the exercise of economic output and the composition of operations that have been conducted to reach this result.