Accounting is an essential method used in business management especially in finance and helps to determine the economic position of the organization. The monetary transactions, profit, and tax all are considered in accounting by the bookkeeping method. It helps the organization to understand the lagging factors and maintain the business in an effective order. Few basic concepts of accounting help an organization to maintain the financial bill and contribute its role in economics. Students, who want accounting concept assignment help, can consider BookMyEssay, as we have an expert team to guide in related subject with relevant information.
Basic Concepts of Accounting:
- Accrual Concept: Suppose you sold a product on the 26th of September 2010, the amount is not paid at the time of purchase and you received the half amount of it on the 28th of September and rest is paid on 5 October 2010. With the help of the accrual concept, the expenses are recorded at the end of September month i.e., 30th September 2010. Though, no payment has been concluded until 30th September. On the other hand, if the same payment of the product is not received until 10th October 2010. The amount is considered in revenue (receiving amount) in the year ending 30th September 2010. In short, this concept considers the revenue when it is earned, whereas the expenses are identified when the product is consumed. Auditors are considered to make such financial statements by using this method.
- Consistency Concept: The accounting method adopted by the firm is supposed to be carried on unless there is no other subtle reason to change the earlier method. This ongoing process is beneficial for the organization to change the adopted method can cause a lot of trouble to accountants and the people related to the organization.
- Conservative Concept: profits and revenue are used in accounting when they are recognized whereas, the liabilities are considered then only when there is the possibility of gaining the profit. With the help of, the referencing guide of the earlier calculative method, it can be prepared well.
- Matching Concept: it is an accounting practice in which the organization recognizes revenue with other related expenses in the same accounting period. Accountants especially focus on providing the genuine earning of organization in a certain period.
- Going Concern Concept: it is an assuming method in which the financial statement has been prepared considering the future aspect as well. All expenses in the business are considered according to the current calculating method. Though, there is the uncertainty of sales and manufacture of the product, still this method is concerned to get a rough draft to operate the business.
- Economic Entity: the financial statement of the business is considered separately from the personal transactions made by the business person. The official account is specifically considered by the accountant to prepare the report.
- Monetary Entity: By using this concept, the organization focuses on calculating the entire records of assets and liabilities in one stable currency. It is a quantifiable method to count assets on a monetary basis.
- Period Assumption: organization determines a specific period in which financial reports are meant to be prepared by accountants. It can be quarterly, half-yearly and annually. It depends upon the management to decide the suitable time,according to company requirements.
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