Why is it important to state the assets and liabilities at their correct accrual basis amounts...

Why is it important to state the assets and liabilities at their correct accrual basis amounts at the start of the accounting cycle?

Expert Solution

-	BASED ON THE PERIODICITY CONCEPT WE USED TO PREPARE THE FINANCIAL STATEMENTS TO KNOW THE RESULTS AND FINANCIAL POSITION AT THE END OF PREDETERMINED PERIOD WHICH IS GENERALLY 1 YEAR.
-	ACCOUNTING CYCLE START AGAIN AFTER CLOSING THE ACCOUNTS IN LAST CYCLE
-	TO RESTART THE CYCLE FOR A NEW PERIOD, IT IS VERY MUCH IMPORTANT TO CARRY FORWARD THE BALANCES OF THE ASSETS AND LIABILITIES ACCOUNTS WHICH WERE APPEARING IN THE BALANCE SHEET OF THE LAST PERIOD AND ACCOUNTS WERE NOT CLOSED.
-	IF THERE IS ANY ERROR IN CARRY FORWARDING THE BALANCES OF THE ACCOUNTS, IT WILL BE CONTINUE TO SHOW THE WRONG BALANCE OF THAT ACCOUNT THROUGHOUT THE YEAR
-	IF WE FORGET TO CARRY FORWARD ANY ACCOUNT IN NEXT YEAR THEN THE BALANCE SHEET WILL NOT TALLY AND THERE WILL BE ERROR OF SUSPENSE ACCOUNT.
-	SUCH ERROR WILL NOT GENERATE THE TRUE AND FAIR PICTURE OF THE BALANCE SHEET OF THE CURRENT PERIOD
-	IT MAY AFFECT THE RESULTS OF THE ACCOUNT TOO.
-	IT MISLEADS THE DECISION MAKERS AS THE FINANCIAL STATEMENT OF THE CURRENT YEAR IS NOT ACCURATE.
-	SOMETIMES SUCH ERRORS ARE DONE INTENTIONALLY WHICH IS A FRAUD.
-	IT IS A MATERIAL MISSTATEMENT IN THE FINANCIAL STATEMENTS OF THE CURRENT PERIOD.

ekkarill92 answered 1 year ago

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