Accounting for Income

Introduction

account income is often used as the basis for an indication of the burden of operation of an entity, a criterion of dividend payments, the basis for taxation on income, a determining factor in wage fixing, a guide to management and so on.

Question 1

Economist generally defined income in terms of well-offness. The purpose of income calculation in practical personal business is to give people an indication of the amount that they can give without impoverishing themselves (Hicks, 1946, p.172). However, the chronicle rules that define the measurement of income are relatively ad hoc. Revenue/expense measurement and credit entry guidelines are independently described in SAC 4. Periodic history income appears in the main the result of applying the matching principal, once revenues and expenses are recognised. These traditional definitions which clearly represent the narrow revenue-expense approach suggests five characteristic of accounting income (Accounting Theory, 1993, pg.268).

a)Accounting income is based on the actual transaction entered into by the firm, primarily revenues arising from the sales of goods or services minus the costs of these sales. Conventionally, the accounting profession has used transaction approach to income measurement.

b)Accounting income is based on the period postulate and refers to the financial performance of the firm during a given period.

c)Accounting income is based on the revenue principle and requires the definition, measurement, and citation of revenues. In general, the realisation principle is the test for the recognition of revenues and, consequently, for the recognition of income.

d)Accounting income requires the measurement of expenses in terms of the historical cost, constituting a set adherence to the cost principle.

e) Accounting income requires that the realised revenues of the period be related to appropriate or corresponding relevant coast. Accounting income is therefore based on the matching principle.

Edwards and Bell (1961) had widened the cathode-ray oscilloscope of...

If you want to get a full essay, order it on our website: Ordercustompaper.com



If you want to get a full essay, wisit our page: write my paper