Reference no: EM132672741

Problem 1: What is a good response to the information below and summary?

• Accounting Principle is the rules and guidelines that companies must follow when reporting financial data. Also is designate at the most fundamental level how both companies should record those revenues and expenses. Examples of an Accounting Principle is the accrual and matching principles require companies to match revenues and expenses with the period in which they are incurred, even though any cash changes. Also having GAAP would be a standardized set of accounting principles. The change of accounting principle includes a change of the method of inventory pricing from FIFO to average-cost or a change in accounting for construction from the percentage-of-completion to the completed-contract method. An example is that a company a change in accounting principle by making a retrospective adjustment to the financial statement.

• Accounting Estimates in historical financial statements measure the effects of past business transactions or events or the present status of an asset or liability. An example is when a company estimates values of depreciable assets, uncollectible receivables, inventory obsolescence, the number of periods expected to benefit from a particular expenditure. A company can not handle changes in the estimate retrospectively, those changes could not adjust to the prior years.