Essay StatsEssay Stats

  • Posted By: bemy
  • Date Posted: 10/12/2013
  • Category: Business
  • Words: 973
  • Pages: 4
  • Views: 651
  • Rank: 234

Accounting concepts

We have many free term papers, essays, and research papers on Accounting concepts. You can browse our entire essay database or use our search engine to locate exactly what you are looking for.

Search

Already a Member?

Accounting concepts



Accounting


concepts and conventions
In drawing up
accounting statements, whether they are external "financial accounts"
or internally-focused "management accounts", a clear objective has to
be that the accounts fairly reflect the true "substance" of the business
and the results of its operation.
The theory of
accounting has, therefore, developed the concept of a "true and fair
view". The true and fair view is applied in ensuring and assessing
whether accounts do indeed portray accurately the business' activities.
To support the
application of the "true and fair view", accounting has adopted
certain concepts and conventions which help to ensure that accounting
information is presented accurately and consistently.
Accounting
Conventions
The most commonly
encountered convention is the "historical cost convention".
This requires transactions to be recorded at the price ruling at the time, and
for assets to be valued at their original cost.
Under the
"historical cost convention", therefore, no account is taken of
changing prices in the economy.
The other
conventions you will encounter in a set of accounts can be summarised as
follows:
Monetary measurement
Accountants do not account for items unless they can be
quantified in monetary terms. Items that are not accounted for (unless
someone is prepared to pay something for them) include things like workforce
skill, morale, market leadership, brand recognition, quality of management
etc.
Separate Entity
This convention seeks to ensure that private transactions
and matters relating to the owners of a business are segregated from
transactions that relate to the business.
Realisation
With this convention, accounts recognise transactions (and
any profits arising from them) at the point of sale or transfer of legal ownership
- rather than just when cash actually changes hands. For example, a company
that makes a sale to a customer can recognise that sale when the transaction
is legal - at the point of contract. The actual payment due from the customer
may not arise until several weeks (or months) later - if the customer ...

Search

Already a Member?

Join Now

  • Instant access to our free essays database
  • Manage your saved papers and more…

More...

Saved Essays

Save it and find them easier later.

    Similar EssaysSimilar Essays

    Accounting concepts