1. In your own words, explain the conservatism principle. How is the conservatism principle applied to...

1. In your own words, explain the conservatism principle. How is the conservatism principle applied to the valuation of merchandise inventory? Why do you think this principle is applied to the valuation of merchandise inventory?

2. In your own words, explain the meaning of consistency? How is the consistency principle applied in the choice of inventory valuation methods? Why do you think this principle is applied to inventory valuation?

Expert Solution

Answer 1: The conservatism principle is the concept stating that the recongnition of liabilities and expenses which are uncertain as soon as possible but recongnise revenue and assets when there is certainty. In other words we can say that it is a like prudence which allows recording of future losses but not for future gains.

As conservatism priciple is the reason behind valuation at lower of cost or Net Realisable Value/Market Value which states that inventory should be recorded at lower of the either two i.e. Market Price/Cost.

I think this priciple should applied to valuation of inventory to save the tax because it results in lower taxable income and therefore lower tax receipts.

Answer 2: The consistency concept is stating that we should maintain the consistency in applying accounting principles, practices and procedures in future accounting years what we followed in earlier year(s) because it helps to keep the financial statements comparable. We should only change and adopt the change in above principles if the same will improve the presentation/disclosures of financial statements.

The consistency principle applied when we choose among the different methods available for inventory valuation. If we change the inventory valuation method we have to restate prior years financial statements using the same inventory valuation method. For example if we are following the FIFO in first and second year and change the method from FIFO to LIFO in third year that affects the financials and if in fourth year i want to boorow some money and want to change the method again from LIFO to FIFO its not permitted and that is how i think consistency principle works.

ekkarill92 answered 1 year ago

1. Conservation of Momentum Principle – In your own words, explain the conservation of momentum, and...

1. Conservation of Momentum Principle – In your own words, explain the conservation of momentum, and the condition of its application. 2. In your understanding, what real world applications could benefit from the study of momentum and impulse?

In your own words: (i) Use the Huygens principle to explain how plane parallel wavefronts are...

In your own words: (i) Use the Huygens principle to explain how plane parallel wavefronts are diffracted at a single aperture. (ii) Use the principle of superposition to explain how coherent light emerging from two narrow slits can interfere to produce a pattern on a distant screen.

Explain, in your own words, what the Arbitrage Principle is and provide an example when it...

Explain, in your own words, what the Arbitrage Principle is and provide an example when it is violated. Discuss, in your own words, how the Arbitrage Principle relates to state prices and the Risk-Neutral Valuation Relationship.

Using your own words, explain how the direct write-off method and the allowance method applied in...

Using your own words, explain how the direct write-off method and the allowance method applied in accounting for uncollectible accounts receivables? Give me an explanation of the difference between revenue expenditures, and capital expenditures, and how they are recorded in the accounting system using your own words. Type or paste question here

Use your own words to explain why a typical form of epinephrine is applied with a...

Use your own words to explain why a typical form of epinephrine is applied with a swab locally to control bleeding during nasal surgery. Why is this route preferred and how does this drug work?

Define Le Chatelier’s Principle in your own words: If concentration of a reactant is increased, explain...

Define Le Chatelier’s Principle in your own words: If concentration of a reactant is increased, explain which way (and why) the equilibrium will shift If product is removed from a reaction at equilibrium, it will cause a shift in which direction? Why? If the temperature of an endothermic reaction is raised, what will be the effect on equilibrium? Explain. If the temperature of an exothermic reaction is decreased, what will be the effect on equilibrium? Explain.

in your own words : 1) define the matching principle as you understand it 2) discuss...

in your own words : 1) define the matching principle as you understand it 2) discuss the importance and implication of the matching principle with regards to the financial information and the reporting process

Explain in your own words how to determine the price of a Bond.

1. In your own words, explain how the government can play the role of guardian of...

1. In your own words, explain how the government can play the role of guardian of business in the global context (Pearson text) 2. Briefly outline why Govt. subsidies may be considered controversial. Reflection requirements: You will write a 1 - Page double spaced response to an opinion/reflection question please type it do not write on paper

1.) In your own words, explain the how IP addressing is implemented in a network infrastructure....

1.) In your own words, explain the how IP addressing is implemented in a network infrastructure. Why is it important to know Subnetting and VLSM? 2.) Explain Functions at the OSI and TCP/IP Model Layers.

Question