Deffered Expenses: Deferred expense, also called a prepaid expense, is a cost that has been incurred

but is recorded as an asset until the related goods or services are consumed. In other words, money has
been spent on goods or services in the current period, but the goods and services have not been
consumed in that period.

For exampleinsurance payments are a deferred expense because the buyer pays the insurance in
advance before consuming the coverage. Technically, businesses initially record deferred expenses as
assets before they become expenses over time.

WastingAssets:Wasting assets are those assets which have a limited life and therefore decrease in value
over time.A wasting asset declines in value over multiple time periods. This decline is reflected in the
accounting records by recording depreciation expense for these assets. The depreciation period is
intended to match the same time period over which the decline in valuation occurs. Examples of wasting
assets are computer equipment, vehicles, and furniture.

Slips system of accounting: The slip system of posting refers to the slips used to make entries in the
customers’ personal accounts in the ledger rather than from journals. This method is usually opted for
when there are no vouchers. it reduces the possibility of errors and frauds.it provides a good system of
internal check etc. it saves a lot of time since it is prepared by the customers themselves. The system is
also not free from snags. It suffers from the risk of loss, misappropriation as well as destruction of slips
since they are loose.

Special Journals: companies use primary books to record transactions before posting them to the
general journal. These books are called special journals. Companies keep special journals to record – in
chronological order – the dual effect of the repetitive types of transactions. The most common special
journals include the sales, cash receipts, purchases, and cash disbursements journals. All of these are
used to record specific transactions and keep organized records outside of the general journal. In
other words, this system is a way to categorize transactions into different types and groups.

Total depreciation on a tangible asset accumulated up to a specified date. This amount is subtracted
from the original cost or valuation of the asset to arrive at its book value. Accumulated depreciation
amount represents only the expired value of an asset; it is neither cash nor any other type of asset that
can be used to buy another asset. Also called accrued depreciation. Companies buy assets such as
buildings, furniture, machinery, etc., all of which lose their value with everyday use. This depreciation
loss is to be accounted for in the books of accounts to show the most accurate picture of the financial
statements of a business.

A conceptual framework is a theory of accounting prepared by a standard-setting body against which

practical problems can be tested objectively. A conceptual framework deals with fundamental financial
reporting issues such as the objectives and users of financial statements, the characteristics that make
accounting information useful, the basic elements of financial statements (e.g., assets, liabilities, equity,
income, and expenses), and the concepts for recognizing and measuring these elements in the financial
statements.
8. (a)

Financial Statement: A financial statement is a formal record of the financial activities of a business,
person, or other entity. A financial statement is a report that shows the financial information of a
business.Financial statements are a collection of reports about an organization's financial results,
financial condition, and cash flows.

A complete set of financial statements include at a minimum the following components:

1) Income statement
2) Balance sheet
3) Cash flow statement
4) Changes in equity statement
5) Notes to account

(b)

Limitations of financial statement analysis:

1) Limited use of a single ratio.

2) Lack of adequate standards.
3) Inherent limitations of accounting.
4) Change of accounting procedure.
5) Window dressing.
6) Personal bias.
7) Incomparable.
8) Absolute figures distortive.
9) Price level changes.
10) Ratios no substitutes.
 6.

(a) Cost element of inventory:

 Carrying cost:
 Cost of capital tied up
 Storage and handling costs
 Insurance
 Property taxes
 Depreciation
 Ordering cost
 Cost of placing order
 Shipping and handling cost
 Cost of running short
 Loss of sales
 Loss of customer goodwill

(b)
7. (a)

First and foremost, to make the most out of your inventory and fixed assets, you need to
understand how they differ:

 Fixed assets are property your business owns and uses to produce income, like
machinery, for example. In your accounting, fixed assets are reported in the long-term
section of your balance sheet, typically under headings like ‘property, plant and
equipment’. You record fixed assets at their net book value, that is, the original cost,
minus accumulated depreciation and impairment charges.

 Inventory is your product and goods used to create it. There are generally four types: raw
materials for manufacturing, work in process, finished goods and merchandise purchased
from suppliers. You record inventory as a current asset on your balance sheet, at the
amount paid to purchase it.

(b)

In accounting, the term depreciation refers to the allocation of cost of a tangible asset to expense
to the periods in which the asset is expected to be used to obtain the economic benefit. For
example, a company purchases a piece of equipment for $20,000 and estimates that the
equipment will be used for a period of 10 years. The cost of the equipment (i.e., $20,000) will be
allocated to each of 10 years using some systematic and rational allocation method.

The cost of an asset is initially recorded as an asset in accounting records because the asset will
be used for many periods in future. Afterward, the portion of cost is allocated to a particular
period is removed from the total cost of the asset and becomes the expense of that particular
period and is matched against revenue like any other expense.