What are examples of irregular items? How does a change in accounting principles - 12242

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1. What are examples of irregular items? How does a change in accounting principles affect the financial statements? Who in the organization is responsible for the application of a change in an accounting principle? Why?   (250 WORD)

 

 

2. What is horizontal analysis? What is the value in using horizontal analysis? Why would a company use this analysis? What does this analysis tell you? What is a vertical anaylsis? What is the difference between horizontal and vertical analysis? What are the strengths and weaknesses of the vertical analysis?  (250 WORD)

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3. What are the three most common types of ratios? Why are they important? Which ratios would you use to determine the long-term viability of an organization? Why? (250 WORD)

 

 

 

Solution Description

1. What are examples of irregular items? How does a change in accounting principles affect the financial statements? Who in the organization is responsible for the application of a change in an accounting principle? Why?   (250 WORD)

Irregular items consist of discontinued operations and extra-ordinary items. Discontinued operations are those major components of a business that that organization plans to dispose off. Extra-ordinary items are those events and transactions that do not occur at a regular basis. Their nature is such that they occur rarely. These are the items that do not have much to do with the regular trading activities of the business. If these items are to be considered irregular they should not occur in the near or foreseeable future.

When there is a change in principle in an organization, it is reported as an irregular item in the income statement. The amount that is reported as extra-ordinary item is the amount after tax and is reported before the net income. In order to report the operating results of the year, the method that should be used is accelerated depreciation.

If the auditor believes that the change i