What is Accounting Concepts?
Accounting concepts are a set of beliefs that help to post a transaction in the proper manner. Concepts can also be described as accounting frameworks. Some accounting frameworks are now strictly maintained as accounting standards.
Completeness:
Accounting information should be complete and contain all the necessary data to analyze the information.
Availability:
Accounting information should be available to its users on time. If it's not presented on time then this could lose its useability.
Understandability:
Accounting information is prepared for the stakeholders. They may be external or internal. So, the information should be presented so that everyone can get their desired data from the report.
Relevance:
Accounting information should be relevant to the needs of the users. No bias information should be provided.
Reliability:
Accounting information should be reliable to its users, should not contain any misleading information that might effect the decision of the stakeholders.
Faithful Representation:
All the business transactions should be reported faithfully to the stakeholders.
Consistency:
Same accounting policies should be applied over time. Financial statements from every years should be comparable. Consistency helps to analyze and compare financial statements from different years and make decissions.
Measurable:
All the business transactions should be measurable in currency. Without currency information a transaction is invalid and unrecordable.
Matches Revenue:
Every transactions should be recorded as they match revenue with expenses in the same period. Revenue and expense should be recorded alongside throughout the period.
Going Concern:
According to this concept every business is financially stable that it can run its business to the foreseeable future. And the business will not close its operations unless or until it provides evidence to the contrary.
Materiality:
Materiality shows how a information matters to decision making. The information that might effect the decision of stakeholder is known as Material, and the information that don't have any effect on the decision making is not a material information.
Conservative:
Liabilities that might occur in future time should be included in the financial statement and future revenue should be excluded from the calculations. This should be done to present the true and fair view of financial statements.
Separate Entity:
A business and it's owners should be counted as separate entities and all the transactions should be recorded separately from its owner's.
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