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What accounting concepts will be used when preparing the financial statements?
Wiki User
∙ 13y ago
Four important accounting concepts underpin the preparation of any set of accounts:
Going Concern
Accountants assume, unless there is evidence to the contrary, that a company is not going broke. This has important implications for the valuation of assets and liabilities.
Consistency
Transactions and valuation methods are treated the same way from year to year, or period to period. Users of accounts can, therefore, make more meaningful comparisons of financial performance from year to year. Where accounting policies are changed, companies are required to disclose this fact and explain the impact of any change.
Prudence
Profits are not recognised until a sale has been completed. In addition, a cautious view is taken for future problems and costs of the business (the are "provided for" in the accounts" as soon as their is a reasonable chance that such costs will be incurred in the future.
Matching (or "Accruals")
Income should be properly "matched" with the expenses of a given accounting period.
Key Characteristics of Accounting Information
There is general agreement that, before it can be regarded as useful in satisfying the needs of various user groups, accounting information should satisfy the following criteria:
Criteria
What it means for the preparation of accounting information
Understandability
This implies the expression, with clarity, of accounting information in such a way that it will be understandable to users - who are generally assumed to have a reasonable knowledge of business and economic activities
Relevance
This implies that, to be useful, accounting information must assist a user to form, confirm or maybe revise a view - usually in the context of making a decision (e.g. should I invest, should I lend money to this business? Should I work for this business?)
Consistency
This implies consistent treatment of similar items and application of accounting policies
Comparability
This implies the ability for users to be able to compare similar companies in the same industry group and to make comparisons of performance over time. Much of the work that goes into setting accounting standards is based around the need for comparability.
Reliability
This implies that the accounting information that is presented is truthful, accurate, complete (nothing significant missed out) and capable of being verified (e.g. by a potential investor).
Objectivity
This implies that accounting information is prepared and reported in a "neutral" way. In other words, it is not biased towards a particular user group or vested interest
Wiki User
∙ 14y ago
Wiki User
∙ 9y agoAccounting concepts are important because so many people use accounting documents to determine the financial strength of the organization. When you understand accounting concepts, you can easily read financial documents.
Wiki User
∙ 12y ago- Going concern
- Accruals/matching
- Consistency
- Prudence
In addition to those four, I had added:
- Objectivity
- Duality
- Entity
- Cost
- Monetary measurement
- Materiality
- Realization
- Stable money
Wiki User
∙ 13y agowhere are 7 Accounting concept in the books of CIE which are done for methods
e.g deprecation=prudence
if the company will complete forward=going concern etc.....
Wiki User
∙ 13y agoAccounting Period Cycle.
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Explain how fundamental accounting concepts are used in preparing financial statements?
explain using various example, how the major accounting concepts are used in preparing financial statement??
The purpose of Statements of Financial Accounting Concepts is to?
The purpose of Statements of Financial Accounting Concepts is to : A establish GAAP.
How major accounting concepts are used in preparing financial statements?
HomeThis BlogAuthorAccounting BodiesSubscribeAccounting TermsRevision NotesQuestionsE-BooksFeaturedinternet advertisingMajor Accounting Concepts
What overall or pervasive constraints were developed in Statements of Financial Accounting Concepts?
benefits and costs
What is account concepts?
Accounting concept are customs and tradition which are used as a guide for preparation of financial statements.
What is the role of accounting concepts in preparation of financial statements?
Financial accountants produce financial statements based on generally accepted accounting principles of a respective country. In particular cases financial statements must be prepared according to the International Financial Reporting Standards.Financial accounting serves the following purposes:producing general purpose financial statementsproducing information used by the management of a business entity for decision making, planning and performance evaluationProducing financial statements for meeting regulatory requirements.
Which accounting principle requires that transaction should be recorded in the period they occurred?
There is no one accounting principle that requires that a transaction be recorded in the period it occurs (commonly referred to as accrual basis accounting). There is a conceptual statement that the Financial Accounting Standard Board has issued with regard to the use of accrual accounting. The Financial Accounting Standards Board has issued STATEMENT OF FINANCIAL ACCOUNTING CONCEPTS NO. 6: ELEMENTS OF FINANCIAL STATEMENTS which states in paragraph 134: Items that qualify under the definitions of elements of financial statements and that meet criteria for recognition and measurement are accounted for and included in financial statements by the use of accrual accounting procedures. The basis of accounting, whether cash basis or accrual, should be disclosed in the notes to the financial statements so that the financial statement reader is aware which method of accounting is in use. Generally accepted accounting principles (GAAP) does require the accrual basis of accounting; nevertheless, businesses can present their financial statements on a cash basis as long as proper disclosures are made. The financial statement opinion rendered by the external audit firm would also disclose that the cash basis of accounting is being used.
How legislation and accounting concepts affect an organization accounting policies?
Describe how the legislation and accounting concepts affect an organisation's accounting policiesReporting methods, measurement systems, and disclosures used by a specific company. The accountant should evaluate the appropriateness of accounting policies employed by management. A description of the company's accounting policies should be presented in a separate section preceding the footnotes to the financial statements or as the first footnote. Disclosure of accounting policies should include Accounting Principles and methods of application that involve: (1) a selection from generally accepted alternatives; (2) those peculiar to the industry or field of endeavor; and (3) unusual or different applications of Generally Accepted Accounting Principles (GAAP). Examples of disclosures are basis of Consolidation, depreciation methods, and inventory pricing. Disclosure of accounting policies assists financial readers in better interpreting a company's financial statements. Thus it results in fair presentation of the financial statements.
What do you mean by financial feasibility analysis?
Introduction to Accounting and Financial Statements Course description The Introduction to Nonprofit Accounting and Financial Statements webinar series is designed to introduce basic nonprofit accounting concepts and financial statements to individuals who have had little or no experience with finance or accounting. This self-paced webinar is being held in conjunction with the Nonprofit Financial Stewardship Executive Education program at Harvard Kennedy School. The webinar features Eric Schwartz, Managing Director in PricewaterhouseCoopers National Assurance Health Services. Please note you will not receive a certificate for completing this webinar series. To get more information send me a mail on
Why is a knowledge of accounting terms and concepts useful to persons other than professional accountants?
Most managers, regardless of their area of responsibility (sales, production, etc.) will have some financial responsibilities - preparing budgets or forecasts, controlling costs, etc. Many will have bottom line responsibility for their department or business segment which will requir the ability to read and understand financial statements.
How the legislation and accounting concepts affect an organization's accounting policies?
Reporting methods, measurement systems, and disclosures used by a specific company. The accountant should evaluate the appropriateness of accounting policies employed by management. A description of the company's accounting policies should be presented in a separate section preceding the footnotes to the financial statements or as the first footnote. Disclosure of accounting policies should include Accounting Principles and methods of application that involve: (1) a selection from generally accepted alternatives; (2) those peculiar to the industry or field of endeavor; and (3) unusual or different applications of Generally Accepted Accounting Principles (GAAP). Examples of disclosures are basis of Consolidation, depreciation methods, and inventory pricing. Disclosure of accounting policies assists financial readers in better interpreting a company's financial statements. Thus it results in fair presentation of the financial statements.
Where can I get an accounting course?
Accounting is the process of measuring, processing, and communicating financial information about economic entities such as businesses and corporations. An Accounting course typically covers the fundamental principles, concepts, and techniques used in accounting to record financial transactions and prepare financial statements. Topics covered in an accounting course may include financial statement analysis, bookkeeping, taxation, cost accounting, auditing, and managerial accounting. Graduates of an accounting course can pursue careers in various fields such as public accounting, corporate accounting, government accounting, or nonprofit accounting. Why Learn Accounting Course? Career Opportunities: Accounting is a fundamental component of every business and organization, and as such, there is always a high demand for skilled accountants. Completing an accounting course can open up a variety of career paths in fields such as public accounting, corporate accounting, government accounting, or nonprofit accounting. Financial Literacy: Accounting helps individuals develop a deeper understanding of financial concepts such as income, expenses, profits, and losses. This can enable them to make better financial decisions both in their personal and professional lives. Entrepreneurship: For individuals interested in starting their own business, accounting skills are essential for maintaining accurate financial records and managing cash flow. Professional Development: Accounting courses can help individuals develop critical thinking, analytical, and problem-solving skills that are highly valued in today's job market. Competitive Advantage: Employers often seek candidates with accounting skills, as they are a valuable asset to any organization. Learning accounting can give individuals a competitive advantage in the job market, and it can also help them advance in their current careers. Benefits of Accounting, Taxation & GST Financial Management: Accounting provides a systematic way of recording financial transactions, maintaining financial records, and preparing financial statements. This helps individuals and businesses better manage their finances, make informed decisions, and plan for the future. Tax Compliance: Taxation is an essential component of any business, and compliance with tax laws is mandatory. Understanding taxation can help individuals and businesses meet their tax obligations, minimize their tax liabilities, and avoid penalties for non-compliance. Business Growth: Accounting and taxation can help businesses identify areas of growth, assess their financial health, and develop strategies to improve their profitability. This includes monitoring revenue and expenses, analyzing financial ratios, and preparing financial forecasts. Regulatory Compliance: Goods and Services Tax (GST) is a value-added tax that is levied on the supply of goods and services. Compliance with GST laws is mandatory for businesses that meet certain criteria. Understanding GST can help businesses comply with the law, claim input tax credits, and avoid penalties for non-compliance. Investment Decisions: Accounting and taxation can help individuals and businesses make informed investment decisions by providing financial information about potential investment opportunities. This includes assessing the financial health of companies, analyzing financial ratios, and preparing financial forecasts. Job Opportunity in Accounting There are many job opportunities available for individuals with an accounting background. Some of the most common job titles in the accounting field include: Accountant: An accountant is responsible for preparing financial statements, maintaining financial records, and ensuring compliance with tax laws and regulations. Auditor: An auditor is responsible for reviewing financial statements, internal controls, and accounting systems to ensure accuracy and compliance with accounting standards and regulations. Tax Accountant: A tax accountant specializes in tax preparation, tax planning, and compliance with tax laws and regulations. Financial Analyst: A financial analyst is responsible for analyzing financial data and providing insights to help organizations make informed business decisions. Bookkeeper: A bookkeeper is responsible for recording financial transactions, maintaining financial records, and preparing financial reports. Budget Analyst: A budget analyst is responsible for developing and managing budgets for organizations and providing financial analysis to support decision-making. Controller: A controller is responsible for managing the accounting department of an organization, overseeing financial reporting, and ensuring compliance with accounting standards and regulations. Forensic Accountant: A forensic accountant is responsible for investigating financial fraud, embezzlement, and other financial crimes.
