Diversified Inc. Recovery of Value of Appliance Inventory (Other (Not Listed) Sample)

GAAP Research
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Institutional affiliation
Memorandum
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Subject: Diversified Inc. - Recovery of Value of Appliance Inventory
Economic Object Assumption
The economic entities like the home appliance division manufacturers, food product division and high fashion division ought to keep their financial records distinctly. This means even if the entities need to be collectively entered into records, each economic occurrence should have its distinctive entity
Cash Unit Assumption
In the company, some negligible or small transactions need not to appear in the company’s transactions records i.e. only substantive dealings are included in records.An example from this company is where the reduction in the market value of the products in the third quarter was offset by high-profit margins in High fashion division ought not to have been written down.
The Rule of Full Disclosure
It is expected that the institution previous successes and failures be captured in financial records despite the fact that the institutions monetary status may be affected. In this Diversified Inc case, the High divisions past performance in terms of negative publicity due to the distribution of defective switches is captured.
The Assumption of Time
Depending on the duration of company existence, which may be months or years, the outcome of business operations need to be reported, hence the need for artificial time durations. To minimize problems of gauging the period during which the company is profitable, the whole expense in that period need not to be reported. Provided the period is known, GAAP can be used to record and account for it.
Accounting on Accrual Basis.
This type of account...