ACCTG191 assignment 01 - ID:4825237 Munenori,Yogi Q1. The...

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ID: 4825237 Munenori, Yogi Q1. The reason for understated equity derives from conservatism convention. This  convention forces financial reports to include anticipated and actual loss and to exclude  profits   that   are   not   yet   realised.   This   convention   makes   revenues   deferred   and  understated and expenses moved to earlier time and overstated. A direct result of these  applications is understated assets and overstated liabilities. As a result, in the light of  the balance sheet equation, the owners’ equity is understated. (72 words) Q2. (a) Inventories Inventories include all kinds of tangible stocks within business like finished goods, raw  materials and work-in-progress. The Warehouse Group values it by weighted average  cost   basis   and   net   realisable   value.   Speaking   of   trade-off   between   relevance   and  reliability, it can be said that The Warehouse Group sacrificed reliability for relevance  by taking net realisable value because the price is just an expectation, and that price is  more needed in real situation than historic cost. Taking weighted average cost basis  can be seen both relevant and reliable to some degree, because the other two methods 
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ACCTG191 assignment 01 - ID:4825237 Munenori,Yogi Q1. The...

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