Accounting Concept

Topics: Balance sheet, Generally Accepted Accounting Principles, Income statement Pages: 2 (1344 words) Published: October 26, 2014

The historical cost concept means expenses and assets must be recorded with their original cost according to its representation cost of things from the past. CITATION Wil09 \l 17417 (Wild, Shaw, & Barbara, 2009) For example, APPLE Company bought equipment at the price of RM 10,000 and after few months, the equipment is then estimated to drop in value. The cost of the purchase RM 10 000 would be recorded in the financial report because there is official receipt and documents supporting the value of the equipment. If the accountant want to estimate the lose in value of the equipment, the accountant should use the concept of depreciation. The monetary concept is a concept that money would be only measured and record in a business transaction. CITATION woo12 \l 17417 (Wood & Sangster, 2012) For example, a company owns 10,000 pounds of products to sell and $100,000 worth of cash in bank; if these amounts added together, it won't generate the correct total amount of what the business actually owned. Yet, by using monetary concept, we can count out that $100,000 + $10,000 = $110 000. It produces a misleading figure of the total of what the business owns. Moreover, we can't record the value of a worker; we can’t measure them with a price tag. The going concern concept representing the ability of a business instead of being closed or sold, operate at least twelve month after the end of the reporting period. CITATION Har07 \l 17417 (Harrison, Horngren, Bamber, Best, Fraser, & Willett, 2007) For example, even though the company is facing financial issues and might face bankruptcy in the future. The accounting period of the business would be continuing as usual until the business is officially shut down due to bankruptcy. The time interval concept means the business life of all the company has to separate similarly into the same accounting period. CITATION woo12 \l 17417 (Wood & Sangster, 2012) For example, the accountants of the companies need to...

Bibliography: Harrison, Horngren, Bamber, Best, Fraser, & Willett. (2007). Accounting 5th edition. Midland Typesetters: Pearson Education Australia.
Wild, J. J., Shaw, K. K., & Barbara, C. (2009). Principle of Accounting 19th edition. New York: Mc Graw Hill.
Wood, F., & Sangster, A. (2012). Business Accounting 1 12th Edition. Harlow: Pearson Education Limited.
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Essay on The Accruals And Going Concern Concepts
  • Accounting Concepts Essay
  • Accounting Concept and Conventions Essay
  • Basic Accounting Principles & Concepts Essay
  • Essay on Account: Eleven Key Accounting Concepts Entity
  • Accounting Concepts Essay
  • Essay about financial accounting

Become a StudyMode Member

Sign Up - It's Free