The paper "Accounting Principles and Applications" is a wonderful example of a report on finance and accounting. Valuation is the process through which business assets and entities are measured in monetary terms. (Ball, 2006). The international accounting standards board is faced with many challenges in formulating the necessary financial reporting standards for business entities including the valuation methods. This is because of the many aspects of the business that must be considered in making the necessary regulations. It is necessary that the formulated standards help enhance to reflect a true and fair view of the business affairs.
(FASB, 1999). On the same note, the board have to consider the merits for preparing financial statements which include the following; Determining profit and loss for the business. Determination of various obligations to third parties for example taxation. Financial statements help in obtaining credit facilities from suppliers. For purposes of auditingTo achieve the above purposes there are several concepts and principles used in financial reporting. Some of the principles considered in determining the valuation method to be applied are; The matching principle which requires that the expenses incurred in production of revenue should be deducted from revenues generated during that period. Revenue recognition method which states that revenues should be recognised when sales are made without considering when cash is received. Going concern principle which assumes business certainty and continuity into the future. Objectivity principle which requires accounting information to be supported with evidence but not by opinions and imaginations. A stable dollar principle which requires an assumption of inflationary trends in business. These concepts and principles need to be observed in choosing the method to use in business valuation.
In historical cost method, business resources are recorded initially at their cost.
In this method, exchange price determines the cost.
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Financial Accounting Standards Board (FASB). 1999. Accounting for Contingencies.
Solomon, D. (1999), “Economic and Accounting Concepts of Income”, the Accounting