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

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In preparing the accounts of your company you are faced with a number of problems. These are: a) The long-term future success of the company is extremely uncertain. b) At the year-end, an amount is outstanding for water that has been consumed during the accounting period.. c) During the year, the company purchased Sh.100 worth of biro pens these had all been issued from stock and were still in use at the end of the year. d) A debtor who owes a large amount to the company is rumoured to be going into liquidation. e) 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. In preparing the accounts of your company you are faced with a number of problems. These are: a) The long-term future success of the company is extremely uncertain. b) At the year-end, an amount is outstanding for water that has been consumed during the accounting period.. c) During the year, the company purchased Sh.100 worth of biro pens these had all been issued from stock and were still in use at the end of the year. d) A debtor who owes a large amount to the company is rumoured to be going into liquidation. e) 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.

Answer rating: 100% (QA)

a The accountant should follow the concept of prudence This concept requires that uncertain events be accounted for cautiously and conservatively anti... View the full answer