Answer to Question #240320 in Management for Gundo

Question

2. Discuss the current accounting standards or principles applicable in Ethiopia as a base for

financial statement preparation and presentation.

3. Explain the underlying prescriptions of IFRS

4. Describe five types of business transactions with external parties and another five types of

business transactions from internal sources of a selected form of business company at your

nearby (please indicate the form of company you selected on the answer sheet) and explain

how they are journalized and then reported in the financial statements.

5. Discuss the accounting process as a cycle with a given period by explaining each of the

steps and by giving practical examples.

Answer 1

2. Accounting standards are put in place to improve the quality of financial data that governments disclose. Any set of accounting standards has the ultimate purpose of ensuring that a company's financial statements are complete, consistent, and comparable. The following are some of the most basic accounting principles that can be used in Ethiopia to prepare and display financial statements: Accrual principle, going concern principle, matching principle, and monetary unit principle.

3. The International Financial Reporting Standards (IFRS) are a collection of accounting guidelines for public firms' financial statements that are designed to make them consistent, transparent, and easily comparable across borders. The International Financial Reporting Standards (IFRS) define how businesses must keep records and report their expenses and income. They were created to develop a worldwide accounting language that investors, auditors, government regulators, and other interested parties could understand. The standards are intended to ensure that accounting language, processes, and statements are consistent, as well as to assist businesses and investors in making informed financial analyses and decisions. They were created by the International Accounting Standards Board, which is part of the London-based IFRS Foundation, a not-for-profit organization. According to the Foundation, its goal is to "bring transparency, accountability, and efficiency to financial markets around the world."

4. External business interactions entail the exchange of goods and services for monetary considerations. As a result, any transaction involving two people or organizations, one of whom is buying and the other selling, can be classified as an external transaction. An external transaction occurs when Company A purchases raw materials for its manufacturing process from Company B. Purchase and selling of commodities with outside third parties are examples of others. Internal business transactions do not include sales, but rather internal business operations. This could include calculating employee salaries and evaluating the depreciation value of a certain asset. Internal inventory transfer, depreciation, amortization, documenting losses, and charging of prepaid expenses are among the others. Internal transactions, which involve inter-departmental transactions or are the outcome of internal business processes, usually have no effect on the cash flow of the company. External transactions entail the exchange of resources with external parties and, as a result, have a significant impact on a company's cash flow.

5. The accounting cycle is the comprehensive process of documenting and processing all of a company's financial transactions, from when they occur to when they are represented on financial statements to when the accounts are closed. One of a bookkeeper's key responsibilities is to maintain track of the entire accounting cycle from beginning to end. As long as a company is in business, the cycle repeats itself every fiscal year.

Steps in the accounting cycle

·        Transactions

·        Journal Entries

·        Posting to the General Ledger (GL)

·        Trial Balance

·        Worksheet

·        Adjusting Entries

·        Financial Statements

·        Closing