Four Accounting Principles
American Intercontinental University
Four Accounting Principles
ABSTRACT Accounting principles used by Wal-Mart and the core function of its departments. Wal-Mart’s strength and weaknesses will be listed. Wal-Mart’s last two years of accounting statements are also present.
FOUR ACCOUNTING PRINCIPLES
There are four key assumptions in the generally accepted accounting principles. The key assumptions in generally accepted accounting principles are business entity, going concern, monetary unit and time period principle. Wal-Mart uses these key assumptions every day. The business entity assumption is just the idea that the business functions as a legal and financial entity separate from its owners or any other business and Wal-Mart does this. This assumption means that all the amounts shown as revenue or expense in the financial statements are for the business alone and do not include personal expenses. Going concern is basically the assumption that the business will operate in the future and we all know Wal-Mart will be operating in the future. This would be used when calculating the values for assets, depreciation for Wal-Mart such as calculating the value of their inventory. The monetary unit assumption is that all the amounts listed use one stable currency, and that any amounts in another currency are clearly listed and not confusing. This would come in handy for Wal-Mart because it is a Global company and accepts all different types of money. Time period assumes that all the transactions reported did in fact occur within the time period in question and not at some other point in time (wise Geek, 2012).
There are also four basic principles in the generally accepted accounting principles that Wal-Mart uses. The four basic principles in generally accepted accounting principles are cost, revenue, matching and disclosure. The cost principle is that all values listed and reported are the costs to obtain or acquire the asset, and not the price you are selling the product for this would be important for Wal-Mart because they have a lot of inventory they buy. The revenue principle states that all revenue must be reported when it is realized and earned not when the actual cash is received. This means when Wal-Mart buys something they have to report it then instead of when they sell it. The matching principle holds that the expenses in the financial statement must be matched with the revenue this just means that your financial statements are correctly matched with what they are supposed to. The value of the expense is included in the financial statements when the work product is sold and not when the work or invoice is issued is also important. This means just because the work has been issued doesn’t mean the work has been done so you shouldn’t account for that money until the work is done. The disclosure principle holds that information pertinent to make a reasonable judgment on the company's finances must be included, as long as the costs to obtain the information are reasonable (wise Geek, 2012). Every corporation is urged to use these accounting principles. Wal-Mart has guiding principles they follow. They are always act with integrity, lead with integrity, and expect others to work with integrity, follow the law at all times, be honest and fair, reveal and report all information truthfully and without manipulation or misrepresentation and that work, actions, and relationships outside of your position with the company should be free of any conflicts of interest this means things outside your job should create a conflict at work. They also respect and encourage diversity, and never discriminate against anyone including employees and customers. They also prompt you to call someone at the Global Ethics office if you think...
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