Assignment 1 Example | Topics and Well Written Essays - 1250 words

1 - Assignment Example The double entry system identifies and records all the accounting transactions. Measurement of accounting information involves making subjective judgment about the value of assets or liabilities relating to a business. It also involves measurement of profits or losses made in an accounting period. Accountants also record accounting data which is presented as economic information to users. It is referred to as economic information since it relates to the economic or financial activities of a business. The main financial statements that accountants prepare are the income statement, balance sheet and the cash flow statements (Warren et al, 2008). The balance sheet indicates the resources owned and owed by a business at a particular point in time. It also shows the investments made by the business and the sources of these investments. The income statement shows the profitability of a business while cash flow statement reflects the cash movement in and out of business. The preparation of all financial statements require the accounting professionals to apply all the set accounting processes to the latter in order to ensure relevance, reliability and understandability of the financial statements by the users. This is an indication that too much value of the accounting process is exercised by professionals in the identification, measuring, recording and communication of economic events. Q1. ... For example, Australia has adopted International Accounting Standards (IAS) to oversee accounting regulation in the country. The Financial Reporting Council (FRC) in the same country also identifies those priority issues in need of regulation. The following are the reason as to why regulation of the Preparation and presentation of accounting information is necessary in an organization. a) Accountability Accountability is one reason behind accounting regulation. It is based on the fact that the citizens and the stakeholders have the right to know. Financial information presented by accountants enables a business to be accountable. This is because the actions and activities of the business are produced in the reports. Information may be communicated through management reports, annual reports and accounts (Birt and Boland, 2010). Users need the information to make decisions. They get information on the financial position of the business and on its performance. Users of financial informa tion include governments, lenders, employees, shareholders and society at large. b) Transparency and Disclosure Transparency and disclosure of financial statements helps in preventing and detecting errors and fraud (Lee, 2007). Therefore, through preparation and preparation of financial statement errors and frauds can be detected. An auditor through tests can detect any errors or fraud and reflect them in the audit reports. Disclosure in financial statements must include the financial position like the balance sheet, performance like income statement and compliance like the notes to accounts. Investors can only provide funds for any investment in a company if they quite confident of ‘true’ and ‘fair’ presentation of financial statements. Transparency and

Liquidity Effects in Corporate Bond Spreads Summary Essay

Liquidity Effects in Corporate Bond Spreads Summary - Essay Example However, practical separation of the two fundamental factors is indescribable. Separation of the two fundamental factors during measurement of credit spreads and inherent risks associated with corporate bonds is domineering in understanding individual contributions amongst the two. However, comprehensive understanding of liquidity effects within a specified bond pairs traded by a firm on a given day assists in examining their spreads or yields. Liquidity proxies define the most effective technique of measuring liquidity effects and corporate bond spreads on a given pair of bonds from the same firm. However, liquidity proxies have significant faults in determining the inherent effects requiring addition of clarifying power by incorporating other firms’ bonds. Matching bonds issued by the same firm helps in subduing credit risks and elaborating existing variation within bond spreads. Since liquidity proxies elaborates limited inherent variations in corporate spreads, it is essential to incorporate the aforementioned descriptive power through linking measurement to prices of other bonds within the diverse market. Unreliability of liquidity proxies in providing spreads associated with corporate bonds prompts for further explanation and affirms that measuring bond spreads with liquidity proxies is inherently