Introduction Objective Accrual Basis of Accounting Concept Going Concern Concept Consistency of Presentation Materiality and Aggregation Offsetting Conservatism Principle Prudence Entity Concept Money Measurement Concept Matching Principle Duality Conclusions Reference
Accounting is the recording of financial transactions plus storing, sorting, retrieving, summarizing, and presenting the information in various reports and analyses. Accounting is also a profession consisting of individuals having the formal education to carry out these tasks.
One part of accounting focuses on presenting the information in the form of general-purpose financial statements (balance sheet, income statement, etc.) to people outside of the company. These external reports must be prepared in accordance with generally accepted accounting principles often referred to as GAAP or US GAAP. This part of accounting is referred to as financial accounting.
Accounting also entails providing a company’s management with the information it needs to keep the business financially healthy. These analyses and reports are not distributed outside of the company. Some of the information will originate from the recorded transactions but some of the information will be estimates and projections based on various assumptions. Three examples of internal analyses and reports are budgets, standards for controlling operations, and estimating selling prices for quoting new jobs. This area of accounting is known as management accounting.
Accounting is instrumental within organizations as a means of determining financial stability. Accountants are responsible for determining an organization’s overall wealth, profitability, and liquidity. Without accounting, organizations would have no basis or foundation upon which daily and long-term decisions could be made. The budgets for marketing activities, profit reinvestment, research and development, and company growth all stem from the work of accountants. Accounting is one of the oldest and most respected professions in the world, and accountants can be found in every industry from entertainment to medicine.
Objective .The purpose of this assignment to explain the main 10 concepts of financial accounting with practical example. The 10 key concepts are given below. Accrual Basis of Accounting Concept Going Concern Concept Consistency of Presentation Materiality and Aggregation Offsetting Conservatism Principle Prudence Entity Concept Money Measurement Concept Matching Principle Duality
Accrual Basis of Accounting Concept:
The importance of the growth is something that particularly the amount of money to match, at the end of the accounting period of the already paid or is to be received. It means that income be detected if you are pending. Although cash is received or not received, and the expenditure will be recognized, although tool if you are paid or not paid will be payable. Both the shops are listed in the course of the accounting period itself, on which you are referring to.
The accrual concept under accounting takes on that income at the time of the sale of goods or services regardless of the fact will be implemented, if the cash is received. For example a company were sold for £55,000 on 25. March 2005 and the payment will not be up to 10. April 2005 receive, is the quantity and the company match on the day of the sale i.e. on 25. March 2005 payable. You must be in the income for the year on the 31. March 2005 ending be included.
For example: If the firm were received, 29. March 2005 Rs.20000 but the payment costs, on the 2. April 2005, requires the accrual concept that expenditure for the year ending must be quoted, on the 31. March 2005 although no payment up to 31. March 2005, the service is has been received and has been done is the person to whom the payment should…