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A ratio's values may be distorted as account balances change from the beginning to the end of an accounting period. Use average values for such accounts whenever possible. Financial ratios are no more objective than the accounting methods employed. Changes in accounting policies or choices can yield drastically different ratio values. [6]
Generally Accepted Accounting Principles (GAAP) is the standard framework of guidelines for financial accounting used in any given jurisdiction. It includes the standards, conventions and rules that accountants follow in recording and summarizing and in the preparation of financial statements.
Thus, in social accounting all transactors are treated in a similar way ("as if" they were a business). The accounts can be criticised for being eclectic in some ways, but that is not necessarily a problem; the aim of the exercise is to identify and categorise all flows, and the user can then reaggregate them in different ways.
LIFO considers the last unit arriving in inventory as the first one sold. Which method an accountant selects can have a significant effect on net income and book value and, in turn, on taxation. Using LIFO accounting for inventory, a company generally reports lower net income and lower book value, due to the effects of inflation.
In bookkeeping, an account refers to assets, liabilities, income, expenses, and equity, as represented by individual ledger pages, to which changes in value are chronologically recorded with debit and credit entries.
Here’s what the letters represent: A is the amount of money in your account. P is your principal balance you invested. R is the annual interest rate expressed as a decimal. N is the number of ...
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Specific identification is a method of finding out ending inventory cost.. It requires a detailed physical count so that the company knows exactly how many of each good bought on specific dates comprise the year-end inventory.