Examples of functional currency in the following topics:
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- To deal with foreign currency and bad debts, we have a "gain or loss" account and methods to measure the net value of accounts receivable.
- A foreign currency transaction requires settlement in a currency other than the functional currency.
- A change in exchange rates between the functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction.
- This change in expected functional currency cash flows is a "foreign currency transaction gain or loss" that typically is included in arriving at earnings in the income statement for the period in which the exchange rate is changed.
- Explain how the "gain or loss" account is used for foreign currency transactions and bad debts
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- Types of cash include currency, funds in bank accounts, and non-risky financial instruments that are readily convertible to cash.
- Cash and cash equivalents are not just the amount of currency that a business has in its cash registers and bank accounts; they also include several different types of financial instruments.
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- Cash is generally any currency a business owns.
- Any currency the business has at its headquarters, branches, or in its bank accounts is included as part of its cash account on its financial statements .
- A business's cash account is how much currency it has on hand at a given time.
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- With regards to cash, the footnotes can explain how much of the cash balance was composed of actual currency and how much was cash equivalents.
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- The price is in currency per share, while earnings are in currency per share per year, so the P/E ratio shows the number of years of earnings which would be required to pay back the purchase price, ignoring inflation, earnings growth and the time value of money.
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- Comprehensive income is the sum of net income and other items that must bypass the income statement because they have not been realized, including items like an unrealized holding gain or loss from available for sale securities and foreign currency translation gains or losses.
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- Non-operating income can include gains or losses from investments, property or asset sales, currency exchange, and other atypical gains or losses.
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- The market price of a tradeable bond will be influenced among other things by the amounts, currency, the timing of the interest payments and capital repayment due, the quality of the bond, and the available redemption yield of other comparable bonds which can be traded in the markets.
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- Monetary Unit Principle: assumes a stable currency is going to be the unit of record.
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- One incentive, the opportunity to commit fraud, can be reduced when accounting functions are separated.
- The act of segregating duties separates the record-keeping, authorization, and review functions in the accounting process.