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necessary to develop the specific accounting measurements that are reported during a particular
month, quarter, or year (e.g., how much pension expense should be reported now for the future
benefits that are being earned by employees now, but the amounts will not be known with certainty
until many years to come?). About the only way around the problem of utilizing estimation in
accounting is to wait until all facts are known with certainty before issuing any reports. However, by
the time any information could be reported, it would be so stale as to lose its usefulness. Thus, in
order to timely present information, it is considered to be far better to embrace reasonable estimations
in the normal preparation of ongoing financial reports.
In addition, accounting has not yet advanced to a state of being able to value a business (or a
business’s assets). As such, many transactions and events are reported based upon the historical cost
principle (in contrast to fair value). This principle holds that it is better to maintain accountability over
certain financial statement elements at amounts that are objective and verifiable, rather than opening
the door to random adjustments for value changes that may not be supportable. For example, land is
initially recorded in the accounting records at its purchase price. That historical cost will not be
adjusted even if the fair value is perceived as increasing. While this enhances the “reliability” of
reported data, it can also pose a limitation on its “relevance.” Please click the advert Teach with the Best.
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10 Basics of Accounting & Information Processing The Accounting Profession and Careers 2. The Accounting Profession and Careers
To decide to be an accountant is no more descriptive than deciding to be a doctor. Obviously, there
are many specialty areas. Many accountants engage in the practice of “public” accounting, which
involves providing audit, tax, and consulting services to the general public. To engage in the practice
of public accounting usually requires one to be licensed as a CPA (Certified Public Accountant).
Auditing involves the examination of transactions and systems that underlie an organization’s
financial reports, with the ultimate goal of providing an independent report on the appropriateness of
financial statements. Tax services relate to the providing of help in the preparation and filing of tax
returns and the rendering of advice o...
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This document was uploaded on 09/24/2013.
- Summer '13