In preparing the accounts of your company you are faced with a number of problems. These are: The long-term future success of the company is extremely uncertain.At the year-end, an amount is outstanding for water that has been consumed during the accounting period.During the year, the company purchased Sh.1000 worth of biro pens these had all been issued from stock and were still in use at the end of the year.A debtor who owes a large amount to the company is rumoured to be going into liquidation.The company has had a poor year, and the directors believe that a more balanced results could be presented if a LIFO (last-in-first-out) stock valuation method was adopted, instead of the present FIFO (first-in, first-out) method. Required: State which accounting concepts the accountant should follow in dealing with each of the above problems, and explain briefly what each concept means. ii) The following categories of people are recognized as users of the information contained in financial statements:OwnersFinancial analystsLendersFor each of the above users of financial statements, identify the kind of information they may required, why they require it and the decisions they made from that information.

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Answered: In preparing the accounts of your…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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In preparing the accounts of your company you are faced with a number of problems. These are:

The long-term future success of the company is extremely uncertain.
At the year-end, an amount is outstanding for water that has been consumed during the accounting period.
During the year, the company purchased Sh.1000 worth of biro pens these had all been issued from stock and were still in use at the end of the year.
A debtor who owes a large amount to the company is rumoured to be going into liquidation.
The company has had a poor year, and the directors believe that a more balanced results could be presented if a LIFO (last-in-first-out) stock valuation method was adopted, instead of the present FIFO (first-in, first-out) method.

Required:

State which accounting concepts the accountant should follow in dealing with each of the above problems, and explain briefly what each concept means.

ii) The following categories of people are recognized as users of the information contained in financial statements:

Owners
Financial analysts
Lenders

For each of the above users of financial statements, identify the kind of information they may required, why they require it and the decisions they made from that information.

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