The paper "Response to the Two Accounting Issues" is a perfect example of a finance and accounting assignment. In accordance with generally accepted accounting principles (GAAP), there are two criteria that a company needs to meet before recording its income in its books of accounts. The first criterion is based on critical events that prompt the process of the transaction and that the amount collectable from such transaction can be measured with a certain degree of reliability. It simply means that the company can recognize income when the buyer agrees to purchase their goods and services and the amount to be paid by the buyer is determined.
For instance, the company involved in the sale of clothes will recognize income when the customer pays for the clothes. The critical points are when the cashier rings the clothes through the till the measurable amount is the price of the clothes. The process of revenue recognition is complete as soon as the customer pays for the clothes. In the case highlighted in your circumstances where there is a sale of computers, the company will recognize the revenue of $ 1628 as soon as the computer is sold.
The critical even is when the employee rings the computer through the till the measurable value is the price set for the computer which is $ 1628. The process of revenue recognition is done when the buyer pays $ 1628 for the computer. In another rejoinder, company formation is a term used to denote the steps and procedures of incorporating a business. In many occasions, it is referred to as company registration. The aforementioned terms are both extensively used when incorporating businesses in the republic of Australia.
Under the Australian law and in virtually most international law, a company is considered to be an entity that is essentially separate from the persons who operate or who owns it. This, therefore, means that the company can sue and be sued in its own name. In this respect, the assets owned by individual partners become the property of the company. Typically, companies are categorized into two broad categories namely, private and public limited companies. A company can be limited by liability or by shares.
A company that is limited by liability means that in case the company incurs losses, then no individual shareholder is held accountable for such losses or their effects thereof. The minimum number of persons required to form a private limited company is two to a maximum of fifty persons. While for public limited companies, the minimum number of persons required to incorporate them is seven with no set limit as to the maximum number of subscribers. The legal procedure required in the formation of a company involves: Paper Process The company ACT requires individuals forming a company to send the following documents alongside the registration fees to the registrar of companies.
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Woods, B. (2010). The tenets of Accounting Principles: Ballina: Free Press