Aiou Solved Assignment 1 Code 444 Autumn 2016 Advance Accounting

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Aiou Solved Assignment 1 Code 444 Autumn 2016 Advance Accounting is fully solved for you. The code 444 is advance accounting subject for B.com and explains prospectus of a company or corporation, what is the meaning of prospectus and what is its legal status, moreover what is the meaning of organization cost with examples and how it can be dealt in accounting. The aiou solved assignment 1 code 444 autumn 2016 expressed fully and in detail.

(b) Prospectus:
A prospectus is a formal legal document that is required by and filed with the Securities and Exchange Commission that provides details about an investment offering for sale to the public. The preliminary prospectus is the first offering document provided by a security issuer and includes most of the details of the business and transaction in question; the final prospectus, containing finalized background information including such details as the exact number of shares/certificates issued and the precise offering price is printed after the deal has been made effective. In the case of mutual funds, a fund prospectus contains details on its objectives, investment strategies, risks, performance, distribution policy, fees uric expenses, and fund management.

It commonly provides investors with material information about mutual funds, stocks. bonds and other investments, such as a description of the company’s business, financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties and any other material information. In the context of an individual securities offering, such as an initial public offering, a prospectus is distributed by underwriters or brokerages to potential investors.

AIOU SOLVED ASSIGNMENT 1 CODE 444 AUTUMN 2016

(c) Organization Cost:
Definition:-
The financial accounting term organization costs refer to those expenditures incurred during the formation and launch of a corporation. Organization costs can include legal payments, state and federal registration and incorporation fees, promotions, and charges associated with the underwriting of stocks and bonds. Organization costs can be classified as assets on the company’s balance sheet.

Explanation:-
A business may incur a number of costs as it is forming or during launch. These are considered the “costs of doing business” and are not related to the operation of the company For example, a company might pay attorney and state fees when registering as a corporation. If the company decides to issue common stock or bonds, underwriting fees are also considered organization costs. Accounting rules allow companies to categorize these costs as an asset on the balance sheet, and amortize them over a maximum of 40 years. Typically, companies choose to amortize them over relatively short timeframes (5 to 10 years). According to EASE No. 7, operating losses incurred in the early stages of startup cannot be capitalized. Paragraph 10 states the following:

“Generally accepted accounting principles that apply to established operating enterprises shall govern the recognition of revenue by a development stage enterprise and shall determine whether a cost incurred by a development stage enterprise is to be charged to expense when incurred or is to be capitalized or deferred.”

VISIT ALSO: AIOU SOLVED ASSIGNMENT 2 CODE 444 AUTUMN 2016 A. ACCOUNTING

Current tax law also allows for the capitalization of these costs. To qualify, the cost must meet all four of the following rules:-
• They must be associated with the creation of the corporation.
• Charged to a capital account.
• Amortized over the life of the corporation (if the corporation is determined to have a fixed life).
• Incurred before the end of the first tax year in which the corporation is in business.

AIOU CODE 444 SOLVED ASSIGNMENT 1 AUTUMN 2016

If the company is using the cash method of accounting, they can amortize their organizational costs incurred in the first tax year, even if the costs are not paid in the same year. Examples provided by the IRS include:-
• The cost of organizational meetings and temporary directors
• State incorporation fees
• Legal services
Since tax rules require companies to amortize the above costs over at least five years, companies typically choose to align the tax amortization approach with that used on the balance sheet.

ACCOUNTING ASSIGNMENT 1 CODE 444 SOLVED AUTUMN 2016

Example Before a company exists, the soon-to-be owners of a company meet with an attorney to draft a corporate charter and articles of incorporation (for corporations) or partnership agreement (for partnerships). These legal documents establish the agreements between each one of the shareholders or partners in the new entity. Items that can be addressed in these documents include ownership percentage, stock options, and profit share percentage, among others.

FULLY PREPARED AIOU SOLVED ASSIGNMENT 1 CODE 444 AUTUMN 2016

Once these documents are drafted, the attorney files them with the applicable government organization and applies for a state business license and ID number. A federal number can then be applied for once the state has granted a business entity license.
As you can imagine, this process is not free. The company has to pay for the legal fees, taxes, and other related fees in order to form a legal entity. For tax purposes, these organization costs are typically capitalized and amortized. The IRS does not want businesses to take large deductions in the first year of business. They would rather have the deductions be spread out over a period of time. GAAP, however, generally requires that these costs be expensed when incurred because it is difficult determine their future benefits and relation to future revenues (the matching principle). Unless there are large amounts of organizational expenses, they are usually expensed for GAAP and financial reporting purposes.

AIOU SOLVED ADVANCED ACCOUNTING ASSIGNMENT 1 CODE 444 FOR AUTUMN SEMESTER 2016

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