Explaining Basic Accounting Concepts and Business Structures Essay

Explaining Basic Accounting Concepts and Business Structures - Essay Example The Financial Accounting Standards Board (FASB) is responsible for designing a standard, known as â€Å"The Hierarchy of GAAP† which explicitly details the meaning of GAAP. In this regard, the sources of GAAP are as follows: FASB Standards, Interpretations, and Staff Positions; APB Opinions; and AICPA Accounting Research Bulletins. According to Valade (2010, pars. 10 – 12), the general guidelines explaining the rationale and importance of the hierarchy are summed as: â€Å"Level 1 pronouncements are the top level of authority, and take precedence over lower levels of announcements. If an accounting issue is addressed in multiple levels, guidance in the highest level must be followed. Pronouncements within any level carry equal weight†. In this regard, level 1 or category A in Kieso, Weygandt, & Warfield, 2007, 12) is the most authoritative set of professional bodies but â€Å"if an accounting treatment of an event is not specified by Category A pronouncement, then Categories B through D should be investigated† according to the hierarchical order. The most effective accounting information depends on the usefulness of the information for decision making purposes. According to Kieso, Weygandt, & Warfield (2007, 31), the FASB itemized qualitative characteristics according to hierarchy: the primary qualities being relevance and reliability; and the secondary qualities are comparability and consistency. Under relevance, the critical ingredients that must be ingrained are predictive value, feedback value and timeliness. Under reliability of accounting information, the data must be verifiable, must have representational faithfulness and be neutral. The quality of comparability is relevant in according users of accounting information with accurate and comparable basis for identification of similarities and differences in economic events among business enterprises (Kieso, Weygandt, & Warfield (2007, 33).

Macroeconomics Assignment Example | Topics and Well Written Essays - 250 words - 4

Macroeconomics - Assignment Example The government therefore has to increase their purchases of these products to the same amount as that planned for reduction in the investment spending. c. A change in taxes can produce the same result. This is because taxes affect the production of companies. When taxes are reduced, companies can use that money elsewhere such as for investment purposes, they will also be motivated to increase their production as they will be paying lower taxes. d. In a balanced budget economy law makers have to be very keen on the fiscal policies that they put in place so as to restore the economy to full employment. The most feasible way this can be done is by taking of loans to invest in other areas that will be repaid over time. The blue line in the graph represents the total demand. The red line in the graph represents the total supply of goods and services. The black line represents the economy’s capacity in the long run. The equilibrium where they intersect is the potential output. a) When people buy goods and services using money the money is handed over to the stores who in turn pay their suppliers. The money circulates in the economy and is used by various people. The money supply is therefore maintained. When people use credit banks to pay for their shopping, there is no money that exchanges hands. This leads to a decrease in the money supply in the economy. b) To reduce money supply the bank should increase lending rates. Higher rates mean that fewer people will be willing to borrow money from the bank and over time, there will be a decrease in the money supply within the economy. A. i) The purchasing power parity theory is concerned with the exchange rates (Blaug, 2006). Therates of exchange between two currencies are at equilibrium as long as their domestic purchasing power at a given exchange rate is equal. In this case, Gold should cost the same in both Mexico and U.S after taking into account the interest