Essay on Accounting Is Dubbed “Language” of Business Activities

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Essential link in objectives of business -----‘Accounting is dubbed “language” of business activities conducted by firms as it is used to communicate business transactions per se to all stakeholders’

According to Weygand, Kieso and Kimmel (2012, p.4), the main purpose of accounting is consists of three basic activities, identifying, recording and communicating the business events by users. These three activities help the firm to operate the business to make decision be meaningful. Business has closely connection when doing transaction with their stakeholders by using the accounting, in order to make maximize profits.

Role of firm
Firm (also known as business or enterprise) is an organization involved trade …show more content…
The companies can sell the assets to fair value at the reporting data. If revaluation is used, business needs to follow the revaluation procedures. Assets that are experiencing rapid price changes must be revalued on an annual basis. Otherwise, less frequent revaluation is acceptable. However, most companies choose to remain the original cost they paid instead to revalue. It is faithful to represent the fair value and the negative effects on the net income. Business should evaluate the faithful representation and relevance of trades-off in any case and determine the importance that the company considered at.

To illustrate asset revaluation accounting, assume that an organization called as LMS pizza shop, they purchased the used machine to making pizza for $10,000 on March 11, 2013. But at the end of May 2013, the cooking machine is increased its wealth value to $13,000. At this time, the accountant has two decisions to record this value changed. One is to revalue the price and another one is to keep it remains the same. However, this action should consider by the company own perspective. It is because the revaluation is affecting the net income.

In the short summary, if it is the case that the value falls, the company gets positive effects on the net income. Otherwise, the company obtains negative effects on the net income.
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