Consistency Concern: The Importance Of Accounting Principles

Introduction
What is accounting?
Accounting is the most important thing life. Everyone in the world to the richest person in the world to the poorest person even from the rocket scientist to the average man is performing the task of accounting. Even without knowing it you might be performing the task of accounting as we speak. Accounting is the system used since the time of the small businesses; accounting is the practice of book keeping or keeping track of the financial records from the largest cooperation to the corner store. All of the businesses may differ from each other in many ways but they all have to follow same accounting principles.
What are accounting principles?
Accounting principles are both simple and specific guidelines

Consistency Concern is an important concept for another reason; it is needed for comparability which allows an auditor, an investor, or a stakeholder to compare the financial statements of a company. For ex.
Company A has been using first-in-first-out method for its sports equipment. According to consistency concept it should continue to use first-in-first-out for its sports equipment in the following years to come. If the company wants to change it to another method, say for example the last-in-first-out it must provide in its financial report, the reason for the change in its methods and the effects of the change on its items.

• Going Concern: It is a basic concept which explains if the company continues to operate the same way for the foreseeable future. The condition is important to the businesses because it tells the auditors, stock and shareholders that the company follows the generally accepted accounting standards and tells everyone that it is not operating illegally. For example:
Water and utilities operating facility in Pakistan is stopped by Pakistani court from carrying out operations in Pakistan. The facility is not a going concern concept and because of that it has to be shut

uses:
1. Apple Inc. uses the going concern concept as clearly seen in the balance sheet above that company the rules set by the GAAP and continues to do so from its start in 1976 or it would have shut down by the courts.

2. Apple Inc. accountants’ applied prudence concept as seen in the years 2012 and 2013 that the accountants left blank the short/current long term debt in the liabilities section. This means that the debts were not considered important to be stated in the balance sheet to give any troubling to the board of directors and the accountants used prudence and left them blank.

3. The company has stuck to its accounting period, which is it yearly puts out an annual balance sheet since 1977 and shows its data to its shareholders and potential shareholders.

4. The company uses the concept of entity. As you can see that the transactions seen in the balance sheet above are related to the business and not to the transaction done by the owner for his own use. That is because the owner and business are 2 separate entities and cannot be confused as one or the financial data for the company would be a