Post on 15-Jul-2015
1.13
WHICH THEORY WHEN?
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YouTube Channel for VCE Accounting
© Michael Allison. Author’s permission required for external use.
The Rules of Accounting
Relevance
Reliability
Comparability
Understandability
Entity
Historical cost
Going concern
Reporting period
Monetary unit
Conservatism
Consistency
Qualitative Characteristics Accounting Principles
1.13 WHICH THEORY WHEN?
© Michael Allison. Author’s permission required for external use.
In many instances the “right” answer will depend on how a
question is asked. The “right” answer for a question may be
the “wrong” answer if the question is put another way
Example:
Janet owns a business with a vehicle purchased for
$8,000 five years ago.
This week’s on carsales.com, similar vehicles are being
sold for $6,000.
Her sister needs a car urgently and has offered to pay
$8,200 for the vehicle.
The vehicle has always been valued at $8,000 in the firm’s
books.
1.13 WHICH THEORY WHEN?
Historical cost?
$8,000
Relevance?
$8,200
Reliability?
$8,000
Consistency?
$8,000
Comparability?
$8,000
Conservatism?
$6,000
Comparability?
$8,000
Consistency?
$8,000
Historical cost?
$8,000
Relevance?
$8,200
Reliability?
$8,000
Conservatism?
$6,000
© Michael Allison. Author’s permission required for external use.
TASK
In-class Homework
SQ32 X