ASSIGNMENT 1

1. Discuss the role of the formulation of accounting principles in Indonesia, United States
and also the International principles.
2. How does the concept of consistency aid in the analysis of financial statements? What
type of accounting disclosure is required if this concept is not applied?
3. The president of your firm, Lesky and Lesky, has little background in accounting. Today,
he walked into your office and said, “A year ago we bought a piece of land for $100,000.
This year, inflation has driven prices up by 6%, and an appraiser just told us we could
easily resell the land for $115,000. Yet our balance sheet still shows it at $100,000. It
should be valued at $115,000. That’s what it’s worth. Or, at a minimum, at $106,000.”
Respond to this statement with specific reference to accounting principles applicable in
this situation.
4. Identify the accounting principle(s) applicable to each of the following situations:
a. Tim Roberts owns a bar and a rental apartment and operates a consulting service.
He has separate financial statements for each.
b. An advance collection for magazine subscriptions is reported as a liability titled
Unearned Subscriptions.
c. Purchases for office or store equipment for less than $25 are entered in
Miscellaneous Expense.
d. A company uses the lower of cost or market for valuation of its inventory.
e. Partially completed television sets are carried at the sum of the cost incurred to
date.
f. Land purchased 15 years ago for $40,500 is now worth $346,000. It is still carried
on the books at $40,500.
g. Zero Corporation is being sued for $1,000,000 for breach of contract. Its lawyers
believe that the damages will be minimal. Zero reports the possible loss in a note.
5. The only accurate way to account for the success or failure of an entity is to accumulate
all transactions from the opening of business until the business eventually liquidates.
Comment on whether this is true. Discuss the necessity of having completely accurate
statements.
6. Countries have had problems with the stability of their money. Briefly describe the
problem caused for financial statements when money does not hold a stable value.
7. Inventory that has a market value below the historical cost should be written down in
order to recognize a loss. Comment.
8. Discuss why the concept of full disclosure is difficult to apply.
9. Many important events that influence the prospect for the entity are not recorded in
the financial records. Comment and give an example.
10. An entity may choose between the use of the accrual basis of accounting and the cash
basis. Comment
11. Would an accountant record the personal assets and liabilities of the owners in the
accounts of the business? Explain.
12. Explain the matching principle. How is the matching principle related to the realization
concept?
13. Financial accounting is designed to measure directly the value of a business enterprise.
Comment.
 14. The cash basis does not reasonably indicate when the revenue was earned and when the
cost should be recognized. Comment.
15. The following data relate to Jones Company for the year ended December 31, 2007:
Sales on credit $80,000
Cost of inventory sold on credit 65,000
Collections from customers 60,000
Purchase of inventory on credit 50,000
Payment for purchases 55,000
Cash collections for common stock 30,000
Dividends paid 10,000
Payment to salesclerk 10,000
Determine income on an accrual basis.
Determine income on a cash basis.
16. Describe the following terms, which indicate the period of time included in the financial
statements:
Natural business year
Calendar year
Fiscal year
17. Briefly explain the difference between an accrual basis income statement and a cash
basis income statement.
18. Describe this following revenue recognition:
 Point of sale
 End of production
 Receipt of cash
 During production
 Cost recovery
19. A corporation like General Motors has many owners (stockholders). Which concept
enables the accountant to account for transactions of General Motors, separate and
distinct from the personal transactions of the owners of General Motors?
20. The matching concept involves the determination of when to recognize the costs
associated with the revenue that is being recognized. For some costs, such as
administrative costs, the matching concept is difficult to apply. Comment on when it is
difficult to apply the matching concept. What do accountants often do under these
circumstances?

Instructions:
a. Answer this question in groups with word & ppt format.
b. Choose your own team leader who’s responsible to the assignments submission and the
excellence of the content of the assignments and the presentation (slides and the ability
of presenting the assignments) in class.
c. Submit this assignment via email by only the team leader group to:
ika.pratiwi@president.ac.id
d. Subject email: ex: Group 1 Assignment 1; Group 2 Assignment 1; etc.
e. Submit deadline: Day minus 1 (one) before the class begin at 11.59 p.m.
 f. Each groups have to make hard copy. Don’t forget bring your flash disk for your
presentation in ppt.
g. The maximum time of presentation and Q&A for each group: 30 minutes.

Thank you and good luck!