Net Present Value and Business
IGNOU MBA MS - 04 Solved Assignments July 2011
Course Code : MS - 04
Course Title : Accounting and Finance for Managers
Assignment Code : MS-04/SEM - I /2011
Coverage : All Blocks
Note: Answer all the questions and send them to the Coordinator of the Study Centre you are attached with.
1. Discuss and explain the relevance of the following accounting concepts
a) Business entity
b) Money measurement
c) Continuity
d) Cost
e) Accrual
f) Conservatism
g) Materiality
h) Consistency
i) Periodicity
Solution: FUNDAMENTAL CONCEPTS OF ACCOUNTING
Accounting is the language of business and it is used to communicate financial information. In order for that information to make sense, accounting is based on 12 fundamental concepts. These fundamental concepts then form the basis for all of the Generally Accepted Accounting Principles (GAAP). By using these concepts as the foundation, readers of financial statements and other accounting information do not need to make assumptions about what the numbers mean.
For instance, the difference between reading that a truck has a value of $9000 on the balance sheet and understanding what that $9000 represents is huge. Can you turn around and sell the truck for $9000? If you had to buy the truck today, would you pay $9000? Or, perhaps the original purchase price of the truck was $9000. All of these assumptions lead to very different evaluations of the worth of that asset and how it contributes to the company’s financial situation.
For this reason it is imperative to know and understand the eleven key concepts. a)Business equitity:
When starting or expanding a business, many owners wonder if they should form a business entity and, if so, which one they should use. There is a wide variety of information and "pitches" being made on the Internet regarding the benefits of certain entities versus others. When you cut through the flak, however, the primary reason for forming a business entity is to
Course Code : MS - 04
Course Title : Accounting and Finance for Managers
Assignment Code : MS-04/SEM - I /2011
Coverage : All Blocks
Note: Answer all the questions and send them to the Coordinator of the Study Centre you are attached with.
1. Discuss and explain the relevance of the following accounting concepts
a) Business entity
b) Money measurement
c) Continuity
d) Cost
e) Accrual
f) Conservatism
g) Materiality
h) Consistency
i) Periodicity
Solution: FUNDAMENTAL CONCEPTS OF ACCOUNTING
Accounting is the language of business and it is used to communicate financial information. In order for that information to make sense, accounting is based on 12 fundamental concepts. These fundamental concepts then form the basis for all of the Generally Accepted Accounting Principles (GAAP). By using these concepts as the foundation, readers of financial statements and other accounting information do not need to make assumptions about what the numbers mean.
For instance, the difference between reading that a truck has a value of $9000 on the balance sheet and understanding what that $9000 represents is huge. Can you turn around and sell the truck for $9000? If you had to buy the truck today, would you pay $9000? Or, perhaps the original purchase price of the truck was $9000. All of these assumptions lead to very different evaluations of the worth of that asset and how it contributes to the company’s financial situation.
For this reason it is imperative to know and understand the eleven key concepts. a)Business equitity:
When starting or expanding a business, many owners wonder if they should form a business entity and, if so, which one they should use. There is a wide variety of information and "pitches" being made on the Internet regarding the benefits of certain entities versus others. When you cut through the flak, however, the primary reason for forming a business entity is to