Accounting: An Introduction by Arthur Hindmarch

By Arthur Hindmarch

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The change in the value of the firm which is associated with changes in capital can be distinguished from the circumstances in which it changes as a result of earning a profit, or a loss. When the value of the assets and liabilities changes, to reflectprofitsorlosses (see Sect. 6), the owners' equity will absorb the change. This analysis reflects contemporary legal, social and economic considerations as a result of which the owners' claim extends to profit. g. employees in a profit-sharing scheme.

The changes in owners' equity over time can be classified into capital and profit changes such that: Owners' Equity = Capital + Retained Profit A firm will receive assets from its owners at its inception and may periodically receive further assets from its owners during its life. These direct flows between the 32 Measurement owners and the firm normally termed 'capital inputs'. It is possible that assets which were formerly associated with capital inputs may be returned to the owners, perhaps when a firm no longer requires the assets or ceases its activities.

A. , as for example in Spain and Portugal, the idea of generally accepted accounting concepts does not have the same force. Two recent developments may help to reduce the differences between countries. One was the establishment of the European Economic Community and its programme to harmonise company law in the Community. C. C. K. ) The other development was the setting up in 1973 of an International Accounting Standards Committee to consider the establishment of standards where companies are operating across international boundaries.

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