INCOME CONCEPT IN FINANCIAL REPORTING
Profit is a basic and important post of the financial overview merniliki various uses in various contexts. Profit is generally seen as a basis for taxation, the determinant of the dividend payment policy, investment guidelines, and decision-making, and the element of prediction (Belkaoui, 1993) In SFAC no. 1 states that earnings information is a component of the financial statements provided with the aim of helping to provide information to assess management performance, a representative estimate earnings ability in the long term and assess risks in the investment or loan. Earnings in the conventional sense is the maximum value that can be divided or in consumption during the accounting period in which the state at the end of the period is still the same as in the beginning of the period.
Profit in accounting theory usually refers to the concept that the FASB called comprehensive income. Comprehensive Income interpreted as an increase in net assets other than those resulting from transactions with owners. While earnings are profits which are accumulated during a period or an increase in equity or net assets of a company caused by operating activities and outside business activities for a certain period. Earning the most narrow concept of comprehensive income is the broadest concept (Muqodim, 2005:110).
Inside there are various components of accounting income is a combination of several basic components such as gross profit, operating profit, profit before tax and profit after tax (Muqodim, 2005:131). Thus, in determining accounting profit investors can see from the profit after tax. SFAC No.. 1 in Belkaoui (2000:332) assumes that accounting profit is a good measure of the performance of a company and that the accounting income can be used to forecast future cash flows. Other authors assume that accounting income is relevant in the usual way for models of the decision of investors and creditors.
Accounting income with a variety of interpretations expected to be used among others as (Suwardjono, 2005: 456):
1) Indicators of efficiency of use of funds that are embedded in a company that embodied in the rate of return on investment (rate of retun on inuested capital).
2) Measuring achievement or performance of business entities and manajemcn.
3) The basis of determining the amount of taxation.
4) Equipment control the allocation of economic resources of a country.
5) Basic eligibility determination and assessment of the tariff in any public company.
6) Equipment control over debtors in debt contracts.
7) The basis of compensation and bonus.
8) motivational tool in the management of corporate control.
9) Basic dividends.
When viewed in depth, accounting profit is not the true definition of income but merely an explanation of how to calculate profit. Characteristics of such an understanding of accounting earnings contain several advantages. Some of the advantages presented by the accounting profit Muqodim (2005: 114) is:
ü Proven proven throughout history that accounting income is useful for the users in making economic decisions.
ü Profit accounting has been measured and reported objectively can diuj truth because based on real transactions are supported by evidence.
ü Based on the realization of the principles in recognizing revenue accounting income to meet basic conservatism.
ü Profit accounting useful for control purposes primarily related to management accountability.
PURPOSE OF REPORT EARNINGS
One of the objectives of financial reporting is to provide financial information that can demonstrate achievements of the company in generating profits (earnings per share). With a concept that has been used is expected to report users can make decisions appropriate to their economic interests. Although the concept of earnings used is expected to meet the needs of users, but the existence of various concepts and purposes of profit, resulting in the concept of a single income can not meet all the needs of the users of the report. On the basis of this fact there are two alternatives that can be used to formulate the concept of a single income to meet a variety of general purpose or use different income concepts and presents a clear concept of such profits in particular.
Regardless of the problems that arise, the actual earnings information can be used to fulfill many purposes. The goal is to deliver compelling earnings reporting useful information for interested parties. Information on corporate profits can be used:
1. As an indicator of the efficient use of funds that are embedded in a company that embodied in the rate of return (rate of return on invested capital)
2. As a measure of performance management
3. As a basis for determining the amount of tax
4. As a means of controlling the allocation of economic resources of a State
5. As the base compensation and bonus
6. As a motivational tool in the management of corporate control
7. As a basis for increased prosperity
8. As a basic dividend
QUALITY OF EARNINGS INFORMATION
M. Joseph, et al (2002) mentions that the earnings information to be seen in relation to the perception of decision-making. Because the quality of earnings information is determined by its ability to motivate individual action and assist effective decision making. This is supported by a published FASB SFAC No.. 1, which assumes that accounting income is a good measure of company performance and therefore the accounting profit should be used in the prediction of cash flow and earnings in the future.
Based on this background, Hendriksen in his fifth edition of Accounting Theory (1992:338) define three concepts in an effort to define and measure the return to the levels of language. The concepts include:
a. The concept of profit on the level of Syntax (Structural)
At the syntactic level the concept of income associated with the conventions (habits) and a logical and consistent with rules based on the premise and the concept has evolved from the existing accounting practices. There are two approaches to the measurement of earnings (income measurement) at the syntactic level, namely: Approach of Transaction and Assets Approach.
b. The concept of profit on the level Sematik (interpretive)
In this concept of income are reviewed its relationship with economic realities. In an attempt to give the meaning of the concept of interpretive accounting income (accounting income), the accountants often refers to two economic concepts. Both of these economic concepts are concepts of Capital and Income Maintenance as a Tool for Measuring Efficiency.
c. The concept of profit on the Pragmatic Level (Behavior)
At the pragmatic level (behavioral) concept of income is associated with users of financial statements information that is implied from the profits of the company. Some reactions can be shown to business users with decision-making process of investors and creditors, the reaction rates of reporting income or a letter of response feedback (feedback) from management and the accountant of the reported income.
The concept of this income should at least provide income as material implications for management decisions.
MEASUREMENT & RECOGNITION OF INCOME
Measurement of profit is the determination of the amount of dollars of profit are recorded and presented in the financial statements. Measurement of the profits is highly dependent on the amount of income and expenses. Since profits are part of the revenue, then the concept of raising the revenue realization also applies to profits. Thus the accounting treatment of income will not deviate from the accounting treatment of revenue.
Because profit is the difference between revenues and expenses, profit is recognized generally in line with the recognition of revenues and expenses. In Basic Concepts of Preparation and Presentation of Financial Statements, IAI (1994) states that:
income (income) will be recognized if the increase in future economic benefits associated with an increase in assets or decrease in liabilities has occurred and the amount can be measured reliably. (Paragraph 92)
Conceptually there are three approaches that can be used to measure earnings. Such an approach is the approach of the transaction, the approach of activities and approaches to maintain capital / wealth (capital maintenence)
1. A. Transactions Approach
Transaction approach assumes that changes in asset / debt (income) occurred only because of the transaction, both internally and externally. External transactions arise because of transactions involving a change in the asset / debt with parties outside the company. Internal transactions arising from the use or conversion of assets within the company.
At the time of external transactions occur, the market value can be used as a basis to recognize revenue. Internal transactions derived from the value changes, ie changes in the value of the use or conversion of assets. If a conversion has occurred, then the value of old assets will be converted into assets baru.konsep or approach is similar to the concept of realization of income.
This approach has some goodness that is:
1. Components of income can be classified in various ways. For example: on the basis of, the product / consumer.
2. Operating profit can be separated from non-operating income.
3. Can be used as basis in determining the type and quantity of existing assets and debt at the end of the period.
4. Business efficiency requires external recording transactions for various purposes.
5. Various reports can be created and linked the report to one another.
6. B. Approach Activities
Profit is considered arise when certain activities have been implemented. So profits can arise at this stage of planning, purchasing, production, sales and cash collection. In practice, this approach is an extension of the approach to the transaction. This is due to approach the activity starts with the transaction as a basis of measurement. The difference is that the approach is based on transaction reporting process that measures the transactions with outside parties.
While the activity approach is based on the concept of event / activity in a broad sense, not limited to activities with outside parties. Yet both failed to show a profit in the real world measurements. This is due to the two approaches is based on the same structural relationships that do not exist in the real world.
Goodness activity approach are:
1. Profits from the production and sale of goods requires the evaluation and prediction jenios different than the profits from the purchase and sale of securities in exchange for the procurement of capital gains.
2. Management efficiency can be measured with better when earnings are classified according to the type of activities which are the responsibility of management.
3. Allow better predictions because of differences in the behavior patterns of different types of activities.
1. C. Maintaining Prosperity Approach (Capital Maintenance Concept)
On the basis of this approach, earnings are measured and recognized after the initial capital can be maintained. Before discussing the measurement of return on the basis of the concept of maintaining wealth / capital will be discussed in advance about the concept of profit and capital.
In the concept of maintaining prosperity, capital (capital) broad sense and in its various forms. So capital is defined as a group of property without regard to who owns the property. Thurs (1990) defines income as follows:
Earnings (income) is the change in corporate capital between the two different time points (beginning and end), excluding changes due to investments by owners and distributions to owners, where capital is expressed in the form of value (value) and is based on a particular measurement scale (p. 194)
While Hendrikson (1989) defines capital income as follows: Profit is the flow of services sepanjangperiode time. Capital is the stock of wealth (the embodiment of future services), and profit is the flow of prosperity that can be enjoyed during a specific period (p. 142)
From the definition above, can be formulated on the basis that the concept of capital as the level of prosperity, then it is profits that can flow in konsumsikan prosperity (enjoyed) for a period, without reducing the level of the previous prosperity. Thus, profit can be measured from the difference between the level of prosperity at the end of the period with a level of prosperity in the early period [profit = total net assets (end of period) - the invested capital (initial period)]. The concept of income measurement is referred to the concept of maintaining capital / wealth (wealth or capital maintenance concept).
Capital used in this concept is the net capital (net worth) or net assets. Capital expressed in terms of economic value on a particular measurement scale. measurement of highly influenced by the value (measuring unit), the type of capital, and the scale of measurement. The difference of these factors will lead to differences in the profits to be obtained.
17 January 2012
7 January 2012
ACCOUNTING INFORMATION SYSTEM
ACCOUNTING INFORMATION SYSTEM
SYSTEM A group of elements that are integrated with the same intent to achieve a goal.
Elements of the system:Not all systems have the same combination of elements, but a basic structure are: Input, Transformation, Output, Control Mechanism, Purpose.
Type of System:Open Circle System system that has no element of control mechanisms, and goals.Closed Circle System system accompanied by the presence of elements of the control mechanism and purpose.
System properties:1. Open system: The system is connected to its environment through resource flows.2. Closed system: The system is completely unrelated to the environment.
Physical system: a system consisting of a number of physical resourcesConceptual system: a system that uses conceptual resources (data and information) to represent a physical system.
Evolution of Computer-Based Information Systems
Early Focus On DataIn the early 20th century the use of computers is limited only to the accounting application and used the name of the EDP which is the application of the most basic information systems in each company. Now we use the term SIA to replace the EDP.
New Focus On InformationThe concept of using computers to support the management information system was introduced in 1964 by computer makers. MIS concept to realize that computer applications should be applied to the primary purpose of generating management information.
Revisions Focus On Decision SupportWhile the SIM continues to grow in the face of its weaknesses, a new approach emerged with the name of the DSS, the system of producing information that is aimed at a specific problem to be solved by the manager.
Focus Now On CommunicationApplication of OA (Office Automation) to facilitate communication and increase productivity among managers and other office workers through the use of electronic tools.
Potential In Focus ConsultingCurrently ongoing movement to implement Artificial Intelligence (AI) for business problems. The basic idea of AI is that the computer can be programmed to perform some logical reasoning is the same as humans.
SIA definition:An organizational components that collect, classify, process, analyze and communicate financial information and decision making relevant to parties outside the firm and external parties.
AIS characteristics that distinguishes it from other CBIS subsystems:1. SIA melakasanakan tasks required2. Hold on to a relatively standard procedure3. Handle detailed data4. Historical focus5. Provide minimal information solution
Differences SIA and SIM:• SIA collects classify, process, analyze and communicate financial information is being• SIM collects classify, process, analyze and communicate all types of information
Two components of the AIS- Information Specialist- Accountant
Examples of AIS as a corporate information center:Marketing departments are considering introducing a new product in the company's production line, for that part of the requested analysis report estimates the benefits to be gained from the proposed new productSection SIA projected cost estimates and estimates of revenues associated with such products, then the data obtained is processed by the EDP. After processing the results returned to the SIA for later given to the marketing department.The next two sections will discuss the results of the analysis is to look for an appropriate decision.
From the example above can be found two aspects of dealing with modern business systems, namely:1. The importance of communication between departments / subsystem that leads to achievement of a decision.2. The role of AIS in generating information that can assist other departments to make decisions.
Accounting information generated by the SIA can be divided into two, namely:- Financial accounting information, information that shaped the financial statements addressed to the extern.- Information Management Accounting, useful information for management decision making.
In Management Accounting, there are two components that are used for planning and controlling the company, namely:1. Cost Accounting System2. Budgeting System
Cost Accounting System Used to assist management in planning and supervision of the activities of procurement, distribution and sales processBudgeting is the company's financial projections for the future that are useful to help managers in planning and supervision
Elements that can affect the application of SIA in the company:1. Analysis of Behavior2. Quantitative Methods3. Computer
Analysis of BehaviorAny system that tertuangkan in the paper will not be effective in its application unless an accountant will be able to know the needs of the people involved in the system.Accountants do not have to be a psychologist, but enough to understand how to motivate people to lead to positive corporate performance.In addition, an accountant must realize that everyone has different perceptions in receiving any information, so that the information to be supplied can be designed and communicated in accordance with the behavior (behavior) of decision makers.
Quantitative MethodsIn compiling information, an accountant must use this method to improve the effectiveness and value of information.
ComputerAt some companies, the computer has been used to replace the routine work of an accountant, thus providing more time for accountants to be involved in the decision making process.
SYSTEM A group of elements that are integrated with the same intent to achieve a goal.
Elements of the system:Not all systems have the same combination of elements, but a basic structure are: Input, Transformation, Output, Control Mechanism, Purpose.
Type of System:Open Circle System system that has no element of control mechanisms, and goals.Closed Circle System system accompanied by the presence of elements of the control mechanism and purpose.
System properties:1. Open system: The system is connected to its environment through resource flows.2. Closed system: The system is completely unrelated to the environment.
Physical system: a system consisting of a number of physical resourcesConceptual system: a system that uses conceptual resources (data and information) to represent a physical system.
Evolution of Computer-Based Information Systems
Early Focus On DataIn the early 20th century the use of computers is limited only to the accounting application and used the name of the EDP which is the application of the most basic information systems in each company. Now we use the term SIA to replace the EDP.
New Focus On InformationThe concept of using computers to support the management information system was introduced in 1964 by computer makers. MIS concept to realize that computer applications should be applied to the primary purpose of generating management information.
Revisions Focus On Decision SupportWhile the SIM continues to grow in the face of its weaknesses, a new approach emerged with the name of the DSS, the system of producing information that is aimed at a specific problem to be solved by the manager.
Focus Now On CommunicationApplication of OA (Office Automation) to facilitate communication and increase productivity among managers and other office workers through the use of electronic tools.
Potential In Focus ConsultingCurrently ongoing movement to implement Artificial Intelligence (AI) for business problems. The basic idea of AI is that the computer can be programmed to perform some logical reasoning is the same as humans.
SIA definition:An organizational components that collect, classify, process, analyze and communicate financial information and decision making relevant to parties outside the firm and external parties.
AIS characteristics that distinguishes it from other CBIS subsystems:1. SIA melakasanakan tasks required2. Hold on to a relatively standard procedure3. Handle detailed data4. Historical focus5. Provide minimal information solution
Differences SIA and SIM:• SIA collects classify, process, analyze and communicate financial information is being• SIM collects classify, process, analyze and communicate all types of information
Two components of the AIS- Information Specialist- Accountant
Examples of AIS as a corporate information center:Marketing departments are considering introducing a new product in the company's production line, for that part of the requested analysis report estimates the benefits to be gained from the proposed new productSection SIA projected cost estimates and estimates of revenues associated with such products, then the data obtained is processed by the EDP. After processing the results returned to the SIA for later given to the marketing department.The next two sections will discuss the results of the analysis is to look for an appropriate decision.
From the example above can be found two aspects of dealing with modern business systems, namely:1. The importance of communication between departments / subsystem that leads to achievement of a decision.2. The role of AIS in generating information that can assist other departments to make decisions.
Accounting information generated by the SIA can be divided into two, namely:- Financial accounting information, information that shaped the financial statements addressed to the extern.- Information Management Accounting, useful information for management decision making.
In Management Accounting, there are two components that are used for planning and controlling the company, namely:1. Cost Accounting System2. Budgeting System
Cost Accounting System Used to assist management in planning and supervision of the activities of procurement, distribution and sales processBudgeting is the company's financial projections for the future that are useful to help managers in planning and supervision
Elements that can affect the application of SIA in the company:1. Analysis of Behavior2. Quantitative Methods3. Computer
Analysis of BehaviorAny system that tertuangkan in the paper will not be effective in its application unless an accountant will be able to know the needs of the people involved in the system.Accountants do not have to be a psychologist, but enough to understand how to motivate people to lead to positive corporate performance.In addition, an accountant must realize that everyone has different perceptions in receiving any information, so that the information to be supplied can be designed and communicated in accordance with the behavior (behavior) of decision makers.
Quantitative MethodsIn compiling information, an accountant must use this method to improve the effectiveness and value of information.
ComputerAt some companies, the computer has been used to replace the routine work of an accountant, thus providing more time for accountants to be involved in the decision making process.
Basic Concepts of Information System
Basic Concepts of Information System
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