Proprietorship Business Transactions

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xjuvgr1369

Business Finance

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Instructions

Respond to the following questions or problems using grammatically correct language and appropriate APA citations. To achieve a proficient grade in this assignment, answer the proficient-level queries for each question. To achieve a distinguished grade, answer both sets of queries for each question.

  1. Question 1:
    • Proficient:
      • Discuss the effects of four of the five major accounting assumptions on the accounting process.
    • Distinguished:
      • Identify and completely discusses all five of the major accounting assumptions.
  2. Question 2:
    • Proficient:
      • There are other basic accounting concepts that affect accounting for entities. List and describe four of the five concepts' impact on the accounting process.
    • Distinguished:
      • List and describe all five concepts' impact on the accounting process.
  3. Question 3:
    • Proficient:
      • GAAP set forth standards or methods for presenting financial accounting information. List and describe the purpose for four of the five major accounting principles.
    • Distinguished:
      • List and describe all five major accounting principles.
  4. Question 4:
    • Proficient:
      • In certain instances, companies do not strictly apply accounting principles because of modifying conventions or constraints. Identify and describe the impact on the accounting process of the three modifying conventions as presented in the Accounting Principles: A Business Perspective, Financial Accounting text.
    • Distinguished:
      • Provide an example of where each modifying convention or constraint may be employed.
  5. Question 5:
    • Basic:
      • Correctly state the letter or letters of the principle(s), assumption(s), or concept(s) used to justify the accounting procedure followed for at least four or five of the accounting procedures. These procedures are all correct.
        • Principle(s), assumption(s), concept(s):
            A. Business entity.
            B. Conservatism.
            C. Earning principle of revenue recognition.
            D. Going concern (continuity).
            E. Exchange-price (cost) principle.
            F. Matching principle.
            G. Period cost (or principle of immediate recognition of expense).
            H. Realization principle.
            I. Stable dollar assumption.
        • Accounting procedures:
            1. Inventory is recorded at the lower of cost or market value.
            2. A truck purchased in January was reported at 80 percent of its cost even though its market value at year-end was only 70 percent of its cost.
            3. The collection of $40,000 of cash for services to be performed next year was reported as a current liability.
            4. The president's salary was treated as an expense of the year even though he spent most of his time planning the next two years' activities.
            5. No entry was made to record the company's receipt of an offer of $800,000 for land carried in its accounts at $435,000.
            6. A supply of printed stationery, checks, and invoices with a cost of $8,500 was treated as a current asset at year-end even though it had no value to others.
            7. A tract of land acquired for $180,000 was recorded at that price even though it was appraised at $230,000, and the company would have been willing to pay that amount.
            8. The company paid and charged to expense the $4,200 paid to Craig Nelson for rent of a truck owned by him. Craig Nelson is the sole stockholder of the company.
    • Proficient:
      • Correctly state the letter or letters of the principle(s), assumption(s), or concept(s) used to justify the accounting procedure followed for at least six or seven of the accounting procedures.
    • Distinguished:
      • Correctly state the letter or letters of the principle(s), assumption(s), or concept(s) used to justify the accounting procedure followed for all eight of the accounting procedures.

Write your responses in a Microsoft Word document and submit it as an attachment in the assignment area. Prior to submitting your assignment, review the Proprietorship Business Transactions Scoring Guide to ensure you have met all of the requirements and as a self-assessment of your work. Be sure to address the questions at the proficient and distinguished levels to achieve the highest grade possible.

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Explanation & Answer

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Running head: PROPRIETORSHIP BUSINESS TRANSACTIONS

Proprietorship Business Transactions
Name of Student
Name of Professor
Course Title
Date

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PROPRIETORSHIP BUSINESS TRANSACTIONS

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Question one
Proficient and Distinguished:

The major assumptions of accounting comprise of: business entity, going concern, money
measurement, stable dollar and periodicity. The Business entity idea is based on assumption that
every business has its own existence separate from its creditors, owners, employees, interested
parties, customers, interested parties. In other words, this concept assumes that each business is
the accounting entity. This means that the financial statements are assumed as part of a particular
business entity.
The going-concern assumption clarifies that an entity will keep on operating and
performing indefinitely unless a strong evidence comes in to an existence hence terminating that
entity. The termination of an existing entity will happen in case a business firm ceases its business
operations and go to an extend of selling all its assets. This process of terminating business
operations is termed as liquidation (Kimmel, Weygandt & Kieso, 2010).
Money measurement assumption involves the use of a monetary-unit like dollars in place
of physical or any other units of measurement. Using a precise monetary-unit offers accountants
with a common-unit of measurement which they use when reporting their business economic
activity. In normal circumstances, financial statements identify organizational monetary-units of
measurement hence enabling the statement user to come up with valid comparison of business
amounts.
Stable dollar assumption, assumes that dollar will only be accepted as a reasonably stableunit of measurement. Therefore, firm accountants are unable to make any kind of adjustments

PROPRIETORSHIP BUSINESS TRANSACTIONS

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which may change the value o...


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