Principles of Accounting

1. Bank reconciliation is quite significant in the management of a bank account. One is advised to depend specially on the online bank statement to trace the accounting processes. Reconciliation is quite simple if it done regularly to maintain a constant accurate record of drawings and deposits. At constant intervals, one has to make sure that they match with one at the bank. The bank reconciliation is vital for business so as to make sure that there is a correct accounting of the finances.

Reconciliation of the bank statement is very significant when one has activities that are not included in the account. For instance when one relies on the online tracking, and you fail to recall that you wrote a check, one would be functioning on assumption that one has excess money that he actually has (Broadmoor, 2012). This may result to denial of payments, overdraft among others. When one reconciles his or her bank statement one is able to remember to include them on their records, hence none reliance on the online tracking system.

The reconciliation of bank statement makes it possible for one to cut down on money that has not been used in suspense accounts; it is able to note errors and fraudulent costs and limit them. Like the case of double cost for services or a compromise of the debit card. Number and apply it for activities that are fraudulent. It similarly has the ability to acquire unnoticed purchases and sales invoices. Generally, it is quite significant to reconcile the bank statements so that one is in line with the bank. The reconciliation of a business statement is a vital business practice. The reconciliation statement has to be done immediately so as to make amends to the issues that exist with the bank statement or accounting book.

2. Wages are treated as a capital expenditure in the event the expenditure is linked to the purchases, receipt or erection of a fixed asset. For instance the wages that are issued to the staff for placing machines, the charge of the platform is fixed repair of secondary machines bought, interest on loans added to buy fixed assets among others.

Transport expenses are treated as capital expenditure in the case where expenditure is applied so as to get the right to continue with the business. For instance the expenses accrued when moving a company moving or acquiring a license.

Raw materials and stores are treated a capital expenditure in the case where the expenditure is applied for the extension of something or enhancement of a fixed asset. If in any case there is an expense that is accrued by lowering or improving the results the expense is attributed to be capital expenditure.

Legal fees are attributed to be capital expenditure; it is an expense that is undertaken so as to obtain the right to undertake a business (Accountancy, n.d.). This expense is used to start or prepare a business; the legal fees are used to safeguard the right to start or continue to do business.

3. Accounting information is attributed as being the language of business. It is applied by the business people among others so as to understand and evaluate the financial stature, performance and cash trend of the business organization. There are a number of reasons as to why the interested parties may use accounting information.

Accounting information is vital in the communication of important ideas as well as it has a significant impact on the business and its current and upcoming strategies. For this information to be useful it has to be in line with the format of relevance, reliability, understandability and comparability.

There is the aspect of relevance which makes it sure the information has the ability of making a change and inducing economic choices. This information has the components of predictive value, reaction value and timelines. When looking at the reliability of accounting information, this information is void of bias and follows the aspect of neutrality. In understandability, the accounting information is coherent, graspable and able to bring about a sense of understanding (Dilipchandra, 2012). This information is articulated in the most simple business aspects; hence it is simple for the business executive to acquire sense of the indication which is applied by the financial information. In terms of comparability, the accounting information is comparable in the business organization and other external sectors. Comparison is made between two competitors. This information is vital in coming up with a working decision for the business.

 

 

 

 

 

 

 

 

References

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