Karate King Letter to Mr. Johnnie Petro - Case Study

Karate King Letter to Mr. Johnnie Petro - - role Study ExampleJust for your information, accounting is not a static system but a dynamic process that incorporates the gener eithery accepted accounting rationales (GAAP) that is evolved to suit the needs of the people who read the pecuniary statements of any business. This memo provides some basic details on the principles and concepts like business entity, monetary unit, button concern, cost principle, time current, consistency, materiality, full disclosure, objectivity, r so farue recognition and matching principle, which form the basis for applying the GAAP. Under this principle, from an accounting point of view the transactions of a business entity operating in any form of system are considered separate and distinct from that of the personal transactions. It is necessary to maintain the personal transactions separate even if the owners work in the business entity.Monetary Unit PrincipleThe assumption tardily this principle is that the arrangement of the accounting transactions would be done in the primary national monetary unit. In the cause of Karate King the monetary unit used is US Dollars. It is the responsibility of the accounting function to record all the inflows of sales revenue and the expense outflows in the vaulting horse terms.Going Concern PrincipleIn universal it is assumed that a business entity will remain in operation for an indefinite period. This is the principle behind the going concern concept. The continuity of business assumes that the cost of the assets engaged in the business will be recovered over their useful life by way of profits from the business. Cost Principle This principle is closely associated with the monetary unit principle and it requires that the set of business transactions need to be save at the actual or equivalent cash cost. This principle is also related to stable dollar mark assumption. When the economy of any country suffers from continued periods of inflation or deflation comparing the revenues and earnings for antithetic age would be meaningless if it is assumed that the dollar will have a stable value. However it would fare sense to express the value of the inventories for resale as well as some items of income and some other equilibrate sheet items in terms of current dollar value rather than on historic dollar value.Time Period PrincipleThis principle requires that the accounting transactions be recorded and analyzed for describe the financial status and profitability of the business operations over a specific time period of operation.Conservatism PrincipleThis principle requires that the balance sheet items like assets should not be overstated and the value of liabilities should not be understated. Consistency PrincipleUnder consistency principle the financial statements should be inclined(p) applying the same accounting principles from one period to another so that the statements become comparable over different pe riods.Materiality Concept The materiality concept implies that all items having value which are important and material should be reported in a correct way so that the readers of the financial statements can take worthy decisions. Full Disclosure PrincipleThis principle states that any future event which is likely to have a major economic impact on the financial position of the company should be disclosed amply to the potential readers of the financial statements.Objectivity PrincipleThis principle implies that all the accounting tr