ACCOUNTING CONCEPTS AND POLICIES 5
Table of Contents
Accounting Concepts and policies…………………………………………………………….. 3 – 7
Relevance of accounting concepts and policies on financial report…………….. 7 – 10
Discount allowed and received………………………………………………………………… 11 – 13
Difference between carriage inwards and carriage outwards……………………. 11 – 13
Differences between straight line and reducing balance methods……………… 11 – 13
References……………………………………………………………………………………………… 14 - 16
Introduction
Accounting Concepts and Principles
These are rules and principles of accounting that are essential and should be followed by any organization in preparation of all accounts and financial statements. The following are accounting concepts and policies that must be applied in preparation of account statements,
Entity Concept, according to this concept, the owner of the business or proprietor must be separate and distinct from the business or enterprise. Therefore business is treated as a separate unit. Moreover, business transactions must be recorded in financial books as well, so as to keep an exact record for an organization or an entity (B.Krishna, 2010). Example; assuming that am a CPA and I received $900 bill for utilities. I paid the whole amount using my business account. $600 is to be considered a withdrawal because only $300 (1/3rd) related to business and the other $600 was for domestic purpose. It is also known as business entity.
Money Measurement, under this concept, each of those occasions/truths or exchanges happening inside a book keeping period which bring out about the changes of money related position of business or an organization and are measurable in monetary terms, must be recorded in the financial accounts (B.Krishna, 2010). In other words, any event or facts that have direct effect to the business but cannot be measured in monetary terms cannot be included in monetary terms. For example I am a financial manager of a particular organization and due to an accident occurred upon me I could not attend
Accounting Concepts and policies…………………………………………………………….. 3 – 7
Relevance of accounting concepts and policies on financial report…………….. 7 – 10
Discount allowed and received………………………………………………………………… 11 – 13
Difference between carriage inwards and carriage outwards……………………. 11 – 13
Differences between straight line and reducing balance methods……………… 11 – 13
References……………………………………………………………………………………………… 14 - 16
Introduction
Accounting Concepts and Principles
These are rules and principles of accounting that are essential and should be followed by any organization in preparation of all accounts and financial statements. The following are accounting concepts and policies that must be applied in preparation of account statements,
Entity Concept, according to this concept, the owner of the business or proprietor must be separate and distinct from the business or enterprise. Therefore business is treated as a separate unit. Moreover, business transactions must be recorded in financial books as well, so as to keep an exact record for an organization or an entity (B.Krishna, 2010). Example; assuming that am a CPA and I received $900 bill for utilities. I paid the whole amount using my business account. $600 is to be considered a withdrawal because only $300 (1/3rd) related to business and the other $600 was for domestic purpose. It is also known as business entity.
Money Measurement, under this concept, each of those occasions/truths or exchanges happening inside a book keeping period which bring out about the changes of money related position of business or an organization and are measurable in monetary terms, must be recorded in the financial accounts (B.Krishna, 2010). In other words, any event or facts that have direct effect to the business but cannot be measured in monetary terms cannot be included in monetary terms. For example I am a financial manager of a particular organization and due to an accident occurred upon me I could not attend
References: Accountingexplained.com, (2015). Consistency Concept | Definition and Examples. [Online] Available at: http://accountingexplained.com/FINANCIAL/principles/consistency [Accessed 22 Jan. 2015]. Accountingexplained.com, (2015). Matching Principle | Definition and Examples. [Online] Available at: http://accountingexplained.com/FINANCIAL/principles/matching [Accessed 19 Jan. 2015]. Accountingexplained.com, (2015). Time Period Assumption | Definition and Examples. [Online] Available at: http://accountingexplained.com/FINANCIAL/principles/time-period [Accessed 27 Jan. 2015]. ACCOUNTING-simplified.com, (2015). Accounting for Sales Discount - Explanation on Types of Discount and Examples. [Online] Available at: http://ACCOUNTING-simplified.com/accounting-for-sales-discount.html [Accessed 20 Jan. 2015]. Google Books, (2015). Basic Accounting Concepts & Procedures ' 2006 Ed. [online] Available at: https://books.google.com.my/books? id=-7yMQKRsJ1wC&dq=accounting+concepts+and+principles&source=gbs_navlinks_s [Accessed 24 Jan. 2015]. Google Books, (2015). FINANCIAL Accounting : Concepts, Analyses, Methods And Uses, 1/e. [online] Available at: https://books.google.com.my/books?id=0GcexmV7nX8C&printsec=frontcover&dq=FINANCIAL+Accounting+:+Concepts,+A [Accessed 20 Jan. 2015]. Ventureline.com, (2015). SEPARATE DETERMINATION CONCEPT DEFINITION. [Online] Available at: https://www.ventureline.com/accounting-glossary/S/separate-determination-concept-definition/ [Accessed 25 Jan. 2015]. Voyager.dvc.edu, (2015). TRADE & Cash Discounts. [Online] Available at: http://voyager.dvc.edu/~jnovak/busmath_wk8lecture.htm [Accessed 29 Jan. 2015]. F.Wood and A.Sangster, 2012, Business Accounting 1, Pearson Education Limited, United Kingdom, Twelfth Edition.