ipl-logo

Concept Of Accounting Concepts

1840 Words8 Pages

Introduction
The basic presumption, rules and fundamental of accounting concept are work as the basis of recording all the business transaction and also preparing accounts. The following accounting concept are business entity, going concern, accounting period, money measurement, historical cost, matching, prudence, consistency, objectivity, accrual, dual aspect concept, materiality, substance over form and realisation. These concepts comprise the basic accounting concept.http://cms.sinhgad.edu/SIM_Web_Assets/Samplenotesofaccounting-SIBAR.pdf
Accounting concepts
Firstly, business entity. The owner and the business are separate even though the owner is the people who bring money or capital into the business.
Furthermore, money measurement.Its …show more content…

Matching concept is at the heart of accrual basis of accounting. Big Apple Doughnut has sold different types of doughnuts for 30 years in a small town. It purchases a large amount of flour for RM3,000 to bake doughnuts and resells it to a local restaurant for RM10,000. At the end of the period, Big Apple Doughnut should match the RM3,000 cost with the RM10,000 revenue. Moreover, Majority of the company who make sales are against credit term. Example, when the customer receives delivery of goods or services but promises to make the payment within 30 days. In accordance with accrual concept, revenue is recognized when the delivery is made. Now, risk that the customers may not pay the amount due against those sales, which results in the company writing off the account receivable as bad debts expense. The possibility of bad debts exists when the sale is made, so expense should be recognized right at that moment when the sale is made. Recognizing bad debts expense requires considerable …show more content…

Firstly, business entity. Its advantage only for financial statements users only. It can distinguish between the actual company activity and ownership involvement. Its disadvantage only can records of multiple entities would be intermingled, making quite difficult to discern the financial or taxable results of a single business.
Besides, monetary measurement. It making easier to aggregate and summarise transactions, and comparing the financial statements.On the other hands It is limiting the usefulness of information in the financial statements because non-financial items are ignored (eg loyalty of workforce ).
Then, historical cost. Historical cost is well-known and can be checked to an invoice. It can also increase comparability, there are non-volatile value and straightforward to produce, don’t record till they are realized. When non-current asset values become quickly out of the date. Lower cost become to higher profits in which may lead too high dividends in real terms and users are not interested in current

Show More
Related

  • Hcs/531 Week 4 Health Care Paper

    1417 Words  | 6 Pages

    When being placed in the role of a manager, it is important to understand the finances of the organization and how to read and understand the recording of finances. It is also important to understand how all the different parts of the records fit together to give us the knowledge of where the business is financially. Knowing also the different responsibility centers related to financial recording and how they function is important as a manager. Once a manager understands what and where items belong on a balance sheet, they will better understand the state that the business is in. “It provides you with a picture of the financial health of your practice or organization on a certain date.”

    Read More

  • Essay On Tootsie Roll

    309 Words  | 2 Pages

    Tootsie Roll Tootsie Roll industries is a company that has engaged its operations in manufacturing and selling confectionery products for over 100 years. The company produces a number of products including Tootsie Roll pops, charms and Blow Po among other products. This paper will highlight on the company’s accounting policies and estimates disclosures as well as looking at the company disclosures based on the identified policies. Revenue recognition One of the accounting policies that have been identified in the company’s annual report is the revenue recognition policy.

    Read More

  • Wgu Audit Task

    529 Words  | 3 Pages

    Clients must keep records and books of accounts including cash book, sales ledger, purchases ledger and general ledger. Supporting documents such as invoices, bank statements, pay-in slips, cheque butts, and receipts for payments, payroll records and copies of receipts issued should be retained. A valuation of the stock in trade should be made at the end of the accounting period and the appropriate records maintained. Company should record sufficient to explain each transaction and to enable a true and fair profit & loss account and balance sheet to be prepared. At the end of the accounting period, a physical stock-take should be made to ascertain the quantity and the cost of the stock in hand or the cost of work in progress statements and

    Read More

  • The Theme Of Loss In Indian Horse And I M Not The Indian You Had In Mind

    1429 Words  | 6 Pages

    Also the use of

    Read More

  • Case Study Porcini's Pronto

    829 Words  | 4 Pages

    Porcini’s Pronto Tom Aleso, who was the Marketing vice Director of the Porcini’s Inc., had a good idea of expanding the company’s business of operating the restaurants. He identified an opportunity in creating more full-service chain restaurants that would serve the highway travelers. It was a brilliant proposal since the only competitors that were serving the market then were a few people operating low-end fast food restaurants and small outlets. In fact, this augured well for Porcini’s full-service restaurants and there were signs that they would be embraced by the customers who needed full meals at the rest stations in the course of their journey. However, the biggest challenge that stood along the way was insufficient capital and lack of resources to start up the business, and there were concerns about the quality of the initial services.

    Read More

  • The Pros And Cons Of Inventory Accounting Methods

    979 Words  | 4 Pages

    Throughout the years, several different methods have been developed, which are dependent on the respective regulations of countries and institutions, such as the Internal Revenue Service (IRS). The most common inventory methods include FIFO (first-in, last-out), LIFO (last- in, first-out), HIFO (highest-in, first-out), FEFO (first-expired, first-out), as well as the average costing method (AVCO). Each of them has their specific advantages and disadvantages, and comes with certain restrictions and regulations (Lee and Hsieh, 1983, p.7). This paper is going to take a look at the choice of inventory accounting methods of FIFO and LIFO, and is therefore not going to consider the other inventory accounting methods, as that goes beyond the topic of this

    Read More

  • Analysis Of Liberty Exists In Proportion To Wholesome Restraint By Daniel Webster

    441 Words  | 2 Pages

    The farmers in a town set up their produce stalls in their harvest. As they weigh out their customers’ orders, they use balances that accurately reflect the value of goods being sold. They diligently ensured that the produce is sound, fresh, and free from disease. By

    Read More

  • Essay On Pro Forma

    552 Words  | 3 Pages

    In 2002, the SEC adopted new rules and amendments to address public companies’ disclosure or release of certain financial information that is calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles. The accrual accounting is more popular and be widely used in business world because it produces more accurate and faithful financial statements that constitute better representation of actual circumstances than its main competitors. The major weakness of accrual accounting is that there is some time issue such like the time of occurred and time of recorded would probably be different and it increases the risk of financial information and the risk of correctness. Also, the accrual accounting generally cost more to operate compared with cash accounting

    Read More

  • International Mobility Case Study

    1003 Words  | 5 Pages

    Pros:  Accurate calculation of package  Calculation of ROI  More certainty of the program

    Read More

  • Tesco Accounting Report

    1656 Words  | 7 Pages

    Also many companies reporting related to the state of the value added or environmental information, these are concentrated in industrial sectors. The financial statements reflect the financial position of company, financial performance and cash flows of the company, it is significant to note that the correct depiction of the impacts of transactions and other events and circumstances according to the explanations and criteria identification of assets, liabilities, income and expenses go in the same outline (Brealey,

    Read More

  • The Importance Of Accounting In Personal Finance

    748 Words  | 3 Pages

    According to Averkamp (2016), “accounting is the recording of financial transactions plus storing, sorting, retrieving, summarizing, and presenting information in various reports and analyses”. Therefore knowing how to carry out these tasks

    Read More

  • The Importance Of Accounting History As An Academic Discipline

    1108 Words  | 5 Pages

    It is this that justifies accounting history as a crucially important academic discipline. “History, in itself is instinctive and indigenous to all of us” (Carnegie. et al, 2011), whether individuals know it or not, everyone’s decision making process is strongly based on past experiences, and the past is the key source resorted to whenever a decision is needed to be made. The same is applicable to accounting, the decisions made today in all practices and approaches are drawn from the historical developments in the accounting process, that have led the practice

    Read More

  • Essay On Importance Of Financial Management

    812 Words  | 4 Pages

    1- Investment Decision It is one of the most important decisions. Finance Management is

    Read More

  • Roles Of Money In Macroeconomics Essay

    1772 Words  | 8 Pages

    This enables wage and income earners, producers etc to take pre-emptive action. Some of the measures are Gross Domestic Product (GDP), Gross National Product (GNP) etc - Forecasting: This is necessary to predict the possible future trend of the economy so as to enhance overall efficiency of the economy. This may be short term, medium term as well as long

    Read More

  • Sole Proprietorship Pros And Cons

    1021 Words  | 5 Pages

    Sole proprietorship Pros: Typically are easy to start-up, and the cost to start a sole proprietorship is $0. In addition, net business loans can be deducted from an individual’s personal taxes. The person who is a sole proprietor gets too control all of the financial activities, and make all the business decisions. To add to that, they are also the management and they’re able to respond to any changes or differences.

    Read More

More about Concept Of Accounting Concepts

Open Document