1.Control account used to record the balances on a number of
subsidiary accounts and to provide a cross-check on them.
uses of control account
1. Check on the accuracy
2. Location of errors
3. For internal check
4. More Simply and Quickly
C.Limitations of accounting ratio
(1) Ratios are based on accounting figures given in the
financial statements. However, accounting figures are
themselves subject to deficiencies, approximations, diversity
in practice or even manipulation to some extent. Therefore,
ratios are not very helpful in drawing reliable conclusions.
2) Ratios have inherent problem of comparability. Companies
otherwise similar may employ different accounting methods,
which can cause problems in comparing certain key
relationships. For example, inventory turnover can be
different for a company using FIFO than for the other
company using LIFO method of inventory valuation.
3) Accounting ratios are not totally dependable and they must
be used after giving due weight- age to general economic
conditions, industry situation, position of firms within the
industry, mode of operations, size of firm, diversity of
product which can make the business enterprises completely
dissimilar and thus affect the computation of accounting
ratios.
=============================
2a. Working capital is the amount of a company's current
assets minus the amount of its current liabilities.
2b. Capital employed, also known as funds employed, is the
total amount of capital used for the acquisition of profits. It is
the value of all the assets employed in a business and can be
calculated by adding fixed assets to working capital or
subtracting current liabilities from total assets.
2c. A fixed asset is an item with a useful life greater than one
reporting period, and which exceeds an entity's minimum
capitalization limit .
2d. A current asset is cash and any other company asset that
will be turning to cash within one year from the date shown in
the heading of the company's balance sheet. (If a company
has an operating cycle that is longer than one year, an asset
that will turn to cash within the length of its operating cycle
is considered to be a current asset.)
2e. The rate of stock turnover is a measure of the number of
times inventory is sold or used in a time period such as a
year. The equation for inventory turnover equals the cost of
goods sold or net sales divided by the average inventory.
====================
3a. The accrual concept in accounting means that expenses
and revenues are recorded in the period they occur, whether
or not cash is involved.
3b. The business entity concept states that the transactions
associated with a business must be separately recorded from
those of its owners or other businesses. Doing so requires the
use of separate accounting records for the organization that
completely exclude the assets and liabilities of any other
entity or the owner.
3c. Dual Aspect Concept, also known as Duality Principle, is
a fundamental convention of accounting that necessitates the
recognition of all aspects of an accounting transaction.
3d. PERIODICITY CONCEPT is the concept that each
accounting period has an economic activity associated with
it, and that the activity can be measured, accounted for, and
reported upon.
3e. The going concern principle is the assumption that an
entity will remain in business for the foreseeable future.
Conversely, this means the entity will not be forced to halt
operations and liquidate its assets in the near term at what
may be very low fire-sale prices.
============================
4a)
A company is a legal entity made up of an association of
persons, be they natural, legal, or a mixture of both, for
carrying on a commercial or industrial enterprise.
4bi) An ordinary share represents equity ownership in a
company proportionally with all other ordinary shareholders,
according to their percentage ownership in the company. All
other shares of a company's stock are, by
definition , preferred shares
4b(ii)Preference shares, more commonly referred to as
preferred stock, are shares of a company's stock with
dividends that are paid out to shareholders before common
stock dividends are issued. If the company enters bankruptcy,
the shareholders with preferred stock are entitled to be paid
from company assets first.
4b(iii) A debenture is a type of debt instrument that is not
secured by physical assets or collateral.
Debentures are backed only by the general creditworthiness
and reputation of the issuer. Both corporations and
governments frequently issue this type of bond to secure
capital.
4b(iv) The authorised capital of a company (sometimes
referred to as the authorised share capital, registered capital
or nominal
capital, particularly in the United States) is the maximum
amount of share capital that the company is authorised by its
constitutional documents to issue (allocate) to shareholders.
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subsidiary accounts and to provide a cross-check on them.
uses of control account
1. Check on the accuracy
2. Location of errors
3. For internal check
4. More Simply and Quickly
C.Limitations of accounting ratio
(1) Ratios are based on accounting figures given in the
financial statements. However, accounting figures are
themselves subject to deficiencies, approximations, diversity
in practice or even manipulation to some extent. Therefore,
ratios are not very helpful in drawing reliable conclusions.
2) Ratios have inherent problem of comparability. Companies
otherwise similar may employ different accounting methods,
which can cause problems in comparing certain key
relationships. For example, inventory turnover can be
different for a company using FIFO than for the other
company using LIFO method of inventory valuation.
3) Accounting ratios are not totally dependable and they must
be used after giving due weight- age to general economic
conditions, industry situation, position of firms within the
industry, mode of operations, size of firm, diversity of
product which can make the business enterprises completely
dissimilar and thus affect the computation of accounting
ratios.
=============================
2a. Working capital is the amount of a company's current
assets minus the amount of its current liabilities.
2b. Capital employed, also known as funds employed, is the
total amount of capital used for the acquisition of profits. It is
the value of all the assets employed in a business and can be
calculated by adding fixed assets to working capital or
subtracting current liabilities from total assets.
2c. A fixed asset is an item with a useful life greater than one
reporting period, and which exceeds an entity's minimum
capitalization limit .
2d. A current asset is cash and any other company asset that
will be turning to cash within one year from the date shown in
the heading of the company's balance sheet. (If a company
has an operating cycle that is longer than one year, an asset
that will turn to cash within the length of its operating cycle
is considered to be a current asset.)
2e. The rate of stock turnover is a measure of the number of
times inventory is sold or used in a time period such as a
year. The equation for inventory turnover equals the cost of
goods sold or net sales divided by the average inventory.
====================
3a. The accrual concept in accounting means that expenses
and revenues are recorded in the period they occur, whether
or not cash is involved.
3b. The business entity concept states that the transactions
associated with a business must be separately recorded from
those of its owners or other businesses. Doing so requires the
use of separate accounting records for the organization that
completely exclude the assets and liabilities of any other
entity or the owner.
3c. Dual Aspect Concept, also known as Duality Principle, is
a fundamental convention of accounting that necessitates the
recognition of all aspects of an accounting transaction.
3d. PERIODICITY CONCEPT is the concept that each
accounting period has an economic activity associated with
it, and that the activity can be measured, accounted for, and
reported upon.
3e. The going concern principle is the assumption that an
entity will remain in business for the foreseeable future.
Conversely, this means the entity will not be forced to halt
operations and liquidate its assets in the near term at what
may be very low fire-sale prices.
============================
4a)
A company is a legal entity made up of an association of
persons, be they natural, legal, or a mixture of both, for
carrying on a commercial or industrial enterprise.
4bi) An ordinary share represents equity ownership in a
company proportionally with all other ordinary shareholders,
according to their percentage ownership in the company. All
other shares of a company's stock are, by
definition , preferred shares
4b(ii)Preference shares, more commonly referred to as
preferred stock, are shares of a company's stock with
dividends that are paid out to shareholders before common
stock dividends are issued. If the company enters bankruptcy,
the shareholders with preferred stock are entitled to be paid
from company assets first.
4b(iii) A debenture is a type of debt instrument that is not
secured by physical assets or collateral.
Debentures are backed only by the general creditworthiness
and reputation of the issuer. Both corporations and
governments frequently issue this type of bond to secure
capital.
4b(iv) The authorised capital of a company (sometimes
referred to as the authorised share capital, registered capital
or nominal
capital, particularly in the United States) is the maximum
amount of share capital that the company is authorised by its
constitutional documents to issue (allocate) to shareholders.
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