Question One Presented below are a number of accounting operational guidelines and practices that have been developed overtime All aspects of a corporate bond are presented in the financial statements An entity charges its sales commission costs to expenses when the sales are made Reporting must be done at regular intervals Ensures that relevant information is reported in the financial statements and reports An allowance for uncollectible debts is established All payments out of petty cash are charged to miscellaneous expenses Rationale as to why property, plant and equipment is not reported at liquidation value Price level changes are not recognized in the books of account Intangible assets are capitalized and amortized over their estimated useful lives Repair tools are expensed when purchased Indicates that the personal and business record keeping of a proprietor and proprietorship should be separately maintained Revenue is recognized at the point of sale Goodwill is recognized only when purchased and not when it is internally generated Inventories are carried at the lower of cost and net realizable value Assumes that the shilling is a common denominator of values Allows for agricultural produce to be carried at their estimated selling price less estimated costs to sell Indicates that market value changes subsequent to purchase are not recorded in the books of account Requires that information significant enough to affect the decision of reasonably informed users should be disclosed Similar items are treated in a similar manner from one account period to another Accountants rely more on third party evidence that first party provided evidence Required For each of the above, state the accounting assumption or principle that most appropriately justifies each of the procedures and practices Do not use materiality principle for 4, historical cost principle for 7 and 8, revenue recognition principle for 9 and full disclosure principle for 18 (20 marks)

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Question One: Presented below are a number of accounting operational guidelines and practices that have been developed overtime. All aspects of a corporate bond are

Question One:

Presented below are a number of accounting operational guidelines and practices that have been developed overtime.

All aspects of a corporate bond are presented in the financial statements.
An entity charges its sales commission costs to expenses when the sales are made.
Reporting must be done at regular intervals.
Ensures that relevant information is reported in the financial statements and reports.
An allowance for uncollectible debts is established.
All payments out of petty cash are charged to miscellaneous expenses
Rationale as to why property, plant and equipment is not reported at liquidation value.
Price-level changes are not recognized in the books of account
Intangible assets are capitalized and amortized over their estimated useful lives
Repair tools are expensed when purchased
Indicates that the personal and business record-keeping of a proprietor and proprietorship should be separately maintained.
Revenue is recognized at the point of sale.
Goodwill is recognized only when purchased and not when it is internally generated.
Inventories are carried at the lower of cost and net realizable value.
Assumes that the shilling is a common denominator of values
Allows for agricultural produce to be carried at their estimated selling price less estimated costs to sell.
Indicates that market value changes subsequent to purchase are not recorded in the books of account.
Requires that information significant enough to affect the decision of reasonably informed users should be disclosed.
Similar items are treated in a similar manner from one account period to another.
Accountants rely more on third party evidence that first party provided evidence.

Required:

For each of the above, state the accounting assumption or principle that most appropriately justifies each of the procedures and practices. Do not use materiality principle for 4, historical cost principle for 7 and 8, revenue recognition principle for 9 and full disclosure principle for 18. (20 marks)