3. Is a company “giving away secrets" by publishing Final accounts?
No companies do not give away secrets by publishing final accounts since the final accounts of smaller companies are usually seen by very little people like accountants. On the other hand, large multinational corporations are usually required law to publish their Final accounts. The accounts they publish consist only of financial accounting information which is public and disclosed and the “secrets” are usually in management accounting which is the more confidential financial data.
4. ls there a physical movement in cash when depreciating?
No, there is no physical movement in cash when depreciating Depreciating is the drop in the value of fixed assets overtime due to wear and tear and the assets being obsolete. An example would be wear and tear eventually leading to the replacement of certain assets in a business. The eventual replacement of assets does not mean cash is saved for the replacement but just means that the depreciation is recorded as a non cash in the profit floss account.
5. Comment on methods of depreciation and provide an example where each is most appropriately used
One of the methods of depreciation is the “straight tine method". The straight line method is a common and very simple method to evaluate depreciation. The method is essentially the purchase cost of the asset minus the scrap cost of the asset divided by the expected lifespan of product. A problem with this method of depreciation is that the depreciation calculated through this method is the same every year which does not fully apply to all assets. An asset where this example can be used could be electronic goods like a TV or phone where depreciation is more
constant than something like a motor vehicle.
6. How and why does one measure goodwill‘?
Goodwill is an intangible asset which is measured by the image and reputation ofthe business and other Factors like the value of a business‘ suppliers and contact. One measures goodwill because goodwill can help raise the value of a business and in a sense make its final accounts look better.
7.Comment on both LIFO and FIFO methods of stock valuation and where each is most appropriately used?
LIFO or last in first out is method of stock valuation whore the newest batch of stock is used first. This method of stock valuation is for products that are long lasting such as natural resources such as oil, tin, and copper. LIFO allows for cost of goods value to increase and as an effect load to tax benefits because of lower profits as a result.
FIFO or first in first out is a method of stock valuation where the stocks in a business are valued on the order they were acquired from the business from oldest to newest. This method of stock valuation is used For products that are not long lasting like grocery products. This method allow for unsold stock to be more realistically valued.
8. Window Dressing- List three ways this type of “legal manipulation" can flatter the final
accounts.
There are many different ways of window dressing in the business world that makes the final
accounts appear better for stakeholders. One of the method would be to record the sales revenue
of products paid in credit The effects of this is that the profit number in the profit loss account
would be higher. On top of that, bills and loans could be paid off after final accounts are duo. This would allow for tho business to from tax concessions. Lastly, the business can use LIFO or FIFO stock valuation to manipulate tho gross profit levels.
9. What are the main limitation of final accounts.
The main limitations of final accounts were discussed earlier in question #3. The limitation is that final accounts only covers the quantitative aspect of a business. There are many other factors that affect the performance of a business these include the qualitative aspects like its image and reputation and its organizational objectives. On top of that, final accounts also leaves out human resources and the people that make up a business are the most valuable assets a business has.
