Interested to Buy Any Domain ? << Click Here >> for more details...
Answer Posted / shital
There are four basic accounting concepts. The concepts
specify and explain the guidelines that should be followed
when managing the accounting of a business. Below there is
a list of the these four basic accounting concepts and a
brief summary of each concept.
1. Accruals Concept
The accruals concept states that revenue from transactions
and transactions which cause liabilities are accounted for
when they occur, even if cash or property has not actually
been exchanged between the entities involved in the
transaction. For example, a dentist, Dr. Payne orders and
receives 6 months worth of toothpaste for $500 in January.
Even if he does not pay for the toothpaste until February,
Dr. Payne should still record the $500 liability in January
and not wait until February, since he owns the goods and is
liable to pay for them to the supplier. On its turn the
supplier will be accounting for the sale of toothpaste to
Dr. Payne.
2. Consistency Concept
Once certain accounting method has been applied by the
accountant, this methods must be applied throug all the
further periods for the accounting purposes. The accounting
method should only be changed if there is a valid reason
that requires the change. For example, if the accountant
starts recording transactions using the double-entry
accounting method in January, he or she should continue
applying the double-entry method for the remainder of the
accounting period. He or she should not begin applying the
double-entry method and suddenly switch to the single-entry
accounting method mid-accounting cycle for no identifiable,
valid reason. This means that all the accounting methods
and procedures must be applied consistently to ensure
comparability of information among periods.
3. Going Concern Concept
When the accounting of a business is being managed, it
should be assumed by the accountant that the business is
viable and will still operational in the foreseeable
future. If the accountant has any reason to believe that
the business will not remain viable in the foreseeable
future, he or she must state the reasons for coming to that
conclusion in the financial reports of the business. If the
accountant has an opinion that the company will not remain
in business and there are no sufficient evidence to proof
the opposite, the accountant may simply include a
disclaimer in the financial reports stating that he or she
believes, but cannot show evidence to prove that the
business will not remain viable.
4. Prudency Concept
Liabilities are accounted for in the balance sheet even if
they is only a possibility for such liabilities to occur,
despite they are potential. However, revenues are accounted
for in the financial statements only if the business has
title for such revenue and has already collected or will
collect cash or other assets in the future. If there is a
doubt about this or there is no strong legal basis to
recognize revenue, it is not accounted for in the
accounting books. This concept helps to ensure that
businesses make provisions for potential losses, not just
realized losses, and do not erroneously include revenues
that are simply anticipated, but not yet earned.
| Is This Answer Correct ? | 10 Yes | 2 No |
Post New Answer View All Answers
Whether the TIN and CST no. remain same for a firm in M.P. state. If a firm ask for CST but having only TIN no. is it correct to entertain his invoice?
How Can Pass Credit Limit Entry If We Take Limit Of BANK I Maintain Of Account In Tally.ERP9 Than We Create Bank Ledger of Which Under
what is purchase consideration? How does it come about and how is it treated in the books?
why should the company give first perference to the perference shareholders?
Difference Between Revenue & Capital Expenditure (Give an Example of each )
As a fresher in oracle finance can a get a job in oracle finance n what type of questions can they ask me as a fresher...oracle finance...
what is balance sheet, capital budgeting, financial statements, current ratio, profit maximization?
how we will prepare n file income tax returns for individuals?explain
A Customer has a MNC which has a Unit in USA , All use Same Operation Chart of A/c but they also want local reporting for USA unit .What should they do ? Optons : Use Group chart of account & Group a/c no * Use Group a/c no & Alternative a/c no.2 Use Country Specific Chart of A/c
Nike,Inc. has developed a variable-overhead rate of $10 per machine hour,and estimates fixed overhead $250,000 for production up to 100,000 units per year. If the production manager estimates 9,000 machine hours for the production of 90,000 units next year, what are estimated variable-overhead costs?
what are the accounting ratios
how to work on CMA form in manufacturing compay as well as how to analysis working capital ?
What is money measurement concept
---------is the main or principle book of accounts
where is suspense entry is entered in tally erp9
