History of banking Among many other things, the Code of Hammurabi from BC recorded interest-bearing loans. Banking began with the first prototype banks of merchants of the ancient world, which made grain loans to farmers and traders who carried goods between cities and this system is known as a barter system. This began around BC in Assyria and Babylonia. Later, in ancient Greece and during the Roman Empirelenders based in temples made loans and added two important innovations:
Instead, Any Company, Inc. The income statement differs from the cash flow statement in other ways, too. Cash was received from the issuance of bonds and was paid to shareowners as dividends; neither of those figured in the income statement. Cash was also paid to purchase equipment; this added to the plant and equipment assets but was not subtracted from current revenues because it would be used for many years, not just this one.
Cash from operations is not the same as net income revenues minus expenses. For one thing, not all revenues are collected in cash. Revenue is usually recorded when a customer receives merchandise and either pays for it or promises to pay the company in the future in which case the revenue is recorded in accounts receivable.
Cash from operating activities, on the other hand, reflects the actual cash collected, not the inflow of accounts receivable. Similarly, an expense may be recorded without an actual cash payment.
Table 3 adds items not requiring immediate cash payment to income e. Consolidated statements Most large corporations in the United States and in other industrialized countries own other companies. Thus, for example, the consolidated balance sheet of the parent corporation the corporation that owns the others does not list its investments in its subsidiaries the companies it owns as assets; instead, it includes their assets and liabilities with its own.
Some subsidiary corporations are not wholly owned by the parent; that is, some shares of their common stock are owned by others.
The equity of these minority shareholders in the subsidiary companies is shown separately on the balance sheet. For example, if Any Company, Inc. The financial statements of most large Bank cost accounting medium-size companies in the United States fall primarily within the jurisdiction of the SEC.
The SEC has a good deal of authority to prescribe the content and structure of the financial statements that are submitted to it. Similar authority is vested in provincial regulatory bodies and in the stock exchanges in Canada; disclosure in the United Kingdom is governed by the provisions of the Companies Act.
In Japan financial accounting is guided by three laws: Outsiders review, or auditthe statements and the systems the company used to accumulate the data from which the statements were prepared. Measurement standards In preparing financial statements, the accountant must select from a variety of measurement systems, often standardized by industry or government regulation, that guide the calculation of assets and liabilities.
For example, assets may be measured by their historical cost or by their current replacement value, and inventory may be calculated on a basis of last-in, first-out LIFO or first-in, first-out FIFO.
To enhance comparability, companies in similar industries often find it to their advantage to adhere to the same measurement concepts or principles. In some countries these concepts or principles are prescribed by government bodies, and other guidance is obtained from the International Accounting Standards Board IASBan independent standard-setting organization based in the United Kingdom.
One approach determines asset value by calculating what those assets are worth to their owners. According to this measurement principle, the economic value of an asset is the maximum price that the company would be willing to pay for it.
This amount depends on what the company expects to be able to do with the asset. For business assets, these expectations are usually expressed in terms of forecasts of the inflows of cash the company will receive in the future. When cash inflows are expected to be delayed, value is less than the anticipated cash flow.
Present value is the maximum amount the company would be willing to pay for a future inflow of cash after deducting interest on the investment at a specified rate for the time the company has to wait before it receives its cash. Value, in other words, depends on three factors: The lower the expectation, the more distant the timing, and the higher the interest rate, the less valuable the asset will be.
Value may also be represented by the amount the company could obtain by selling its assets; this is known as fair market value. Continued ownership of an asset implies that its present value to the owner exceeds its market value, which is its apparent value to outsiders. Asset cost Accountants are traditionally reluctant to accept value as the basis of asset measurement in the going concern.
Although monetary assets such as cash or accounts receivable are usually measured by their value, most other assets are measured at cost. The reason is that the accountant finds it difficult to verify the forecasts upon which a generalized value measurement system would have to be based.
The historical cost of an asset is the sum of all the expenditures the company made to acquire it. This amount is not always easily measurable. This general definition of income represents the amount the company could consume during the period and still have as much real wealth at the end of the period as it had at the beginning.
Accountants generally have rejected this approach for the same reason that they have found value an unacceptable basis for asset measurement: Ideally they recognize as income only those increases in wealth that can be substantiated from data pertaining to actual transactions that have taken place with persons outside the company.
In such systems, income is measured when work is performed for an outside customer, when goods are delivered, or when the customer is billed.D) Cost accounting measures information related to the costs of acquiring or using resources in an organization, whereas financial accounting measures a financial position of a company to investors, banks, and external parties.
Cost accounting had its roots in manufacturing businesses, but today it extends to service businesses. For example, a bank will use cost accounting to determine the cost of processing a customer's check and/or a deposit.
This in turn may provide management with guidance in the pricing of these services. > Alex transfers $ from his Visa credit card to his bank account, the bank charges his credit card with a fee of $, this transaction and transfers $ to his bank account.
Accounting: How to record Bank fees? Update Cancel. Answer Wiki. 5 Answers. Garrick Saito, Accounting: Bank account and Bank fees, do you record this in. Cost accounting is a process of collecting, analysing and evaluating various alternative courses of action based on cost efficiency.
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A) process of calculating present value of projected cash flows B) process of allocating costs to cost centers or cost objects C) mathematical description of how a cost changes with changes in the level of an activity relating to that cost D) is a very thorough and detailed way to identifying a cost object when there is a physical relationship between inputs and outputs Answer: C Diff: 2 Objective: 1 AACSB: Analytical .