What is the understated accounting?

Bharat Desai By Bharat Desai, 14th May 2012 | Follow this author | RSS Feed | Short URL http://nut.bz/xp574a4h/
Posted in Wikinut>Business>Accounting & Finance

It is very useful for users of financial statements, but they are not completely accurate. Accountants use a general historical accounts, too, that the accounting statements and understand the cost to make a similar way.

What is the understated sense of financial accounting knowledge is required.

It is very useful for users of financial statements, but they are not completely accurate. Accountants use a general historical accounts, too, that the accounting statements and understand the cost to make a similar way. However, this strategy also makes the balance sheet on some of the assets of the understatement.
Historical cost
Figure out what accounts are undervalued; you first understand the historical cost accounts must be used for the calculation. Activity, such as an account is presented on a reasonable market price, so it will not be undervalued. Inventory, goodwill, trademarks, and property, plant and equipment, such as other accounts, a good potential to be understated. Liabilities and are almost always much less than the most recent report, because there is judgment involved in valuing them. What is the company’s liability is based on the creditor, which is very concrete.
Land
A balance sheet does not change the value on the land, so that if the number of years ago the land was purchased, it may be understated accounting. If the company $ 1 million in expenses and purchase of land 100 years ago, still owns the land costs are still on the books will be a $ 1 million. The company does not increase the land value as the Generally Accepted Accounting Principles (GAAP) is not allowed under the can. Purchased the land for almost 100 years ago today that will cost a lot more than it is again in a few factors, one of which was the inflation since then.

Equity Investments
The initial investment, the share of net income and share dividends: equity stake to the balance sheet is calculated using three factors. First, the initial investment cost is recorded on the balance sheet. Then, the net income of the owner of this investment is added to the market. Finally, if any, are paid out in dividends, which are part of the employer's share is reduced by the investment account. The accounting process that often led to an understatement of the account. For example, company A buying company B. Company B is a windfall profit of $ 1 million and $ 1 million dividend to the Company on the value of an investment company balance sheet is zero, but the company still claims the company, Mother B assets and future income a.
Brand Value
Under GAAP, a company balance sheet on the brand value that can be recorded. Therefore, the company's brand value is understated and does not count for the use of traditional accounting principles. Some analysts estimate the brand value of the third Mother's side used to add value to a company, but this is not estimated and therefore not accurate.

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Comments

author avatar Md Rezaul Karim
14th May 2012 (#)

Good sharing of definitions of accounting. Thank you.

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author avatar Pradeep Kumar B
16th May 2012 (#)

Good accounting lesson. Thank you.

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