Accounting Concept and Conventions - 1685 Words

ACCOUNTING CONCEPT AND CONVENTIONS In drawing up accounting statements, whether they are external financial accounts or internally-focused management accounts, a clear objective has to be that the accounts fairly reflect the true substance of the business and the results of its operation. The theory of accounting has, therefore, developed the concept of a true and fair view. The true and fair view is applied in ensuring and assessing whether accounts do indeed portray accurately the business activities. To support the application of the true and fair view, accounting has adopted certain concepts and conventions which help to ensure that accounting information is presented accurately and consistently. Accounting†¦show more content†¦Objectivity This implies that accounting information is prepared and reported in a neutral way. In other words, it is not biased towards a particular user group or vested interest Generally Accepted Accounting Principles - GAAP The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information. Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting used in any given jurisdiction. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements. GAAP are imposed on companies so that investors have a minimum level of consistency in the financial statements they use when analyzing companies for investment purposes. GAAP cover such things as revenue recognition, balance sheet item classification and outstanding share measurements. Companies are expected to follow GAAP rules when reporting their financial data via financial statements. If a financial statement is not prepared using GAAP principles, be very wary. Principles derive from tradition, such as the concept of matching. In any report of financial statements (audit, compilation, review, etc.), theShow MoreRelatedAccounting Concepts, Conventions and Solutions3647 Words   |  15 PagesContents QUESTION ONE: Accounting Concepts and Conventions 1 a) Accounting Concepts 1 i) The going concern concept. 1 ii) The accruals concept (or matching concept) 1 iii) The entity concept: 3 iv) The money measurement concept: 3 v) The historical cost concept: 4 vi) The realization concept: 4 vii) Duality concept: 4 b) Accounting conventions 5 QUESTION TWO: Clashing accounting concepts and conventions that might bring about inconsistency in the accounting process 9 1. Clash betweenRead MoreStrengths and Weaknesses of Accounting Concepts and Conventions2080 Words   |  9 PagesAccounting for Managers Discuss the strengths and weaknesses of the accounting concepts and conventions and of the regulatory framework (SSAPs and FRSs) that govern published financial statements. Do the criticisms of the concept and the regulatory framework mean that published financial statement do not provide investors with useful information? Introduction Strengths Weaknesses Information needs of investors Conclusion Discuss the strengths and weaknesses of the accounting concepts and conventionsRead MoreBasic Accounting: Concepts, Techniques and Conventions5853 Words   |  24 Pagesedu Managerial Accounting - ACC 500 CHAPTER 15 COVERAGE OF LEARNING OBJECTIVES LEARNING OBJECTIVE FUNDAMENTAL ASSIGNMENT MATERIAL ADDITIONAL ASSIGNMENT MATERIAL EXCEL, COLLAB., INTERNET EXERCISES LO1: Read and interpret the basic financial statements. 19, 20, 25, 30 36 43 LO2: Analyze typical business transactions using the balance sheet equation. A1, A2, B1, B2 22, 23, 26, 27 28, 29, 30, 31 36, 37 41, 42 LO3: Distinguish between the accrual basis of accounting and the cash basisRead MoreEssay about Discuss the Need for Regulation in Financial Reporting1524 Words   |  7 Pagesfinancial reports in different ways. There are international differences in accounting practices. Accounting practices differ from country to country and so do the regulatory frame work and the balance between the public and private regulation. Over the years, bodies like the EU have been formed. There is need for accounting regulation as all these different countries coming together may have different accounting standards, thus there will be the need for financial reports regulation. In the Read MoreGenerally Accepted Accounting Principles (G.A.A.P)1020 Words   |  5 PagesGENERALLY ACCEPTED ACCOUNTING PRINCIPLES (G.A.A.P) GAAP is an international convention of good accounting practices. It is based on the following core principles. In certain instances particular types of accountants that deviate from these principles can be held liable. The Business Entity Concept The business entity concept provides that the accounting for a business or organization be kept separate from the personal affairs of its owner, or from any other business or organization. This meansRead MoreThe Conceptual Framework Of Financial Statements947 Words   |  4 Pageswhether or not the conceptual framework succeeds in improving understanding of financial statements by using EasyJet as an example in addition to explaining how it benefits the users of the accounts. One way that the framework upholds the published accounting standards is that it allows financial statements to be prepared in a consistent manner. This therefore is an advantage because the framework increases the users understanding and assurance in financial reporting which also makes it easier to compareRead MoreEssay on Financial Accounting1505 Words   |  7 PagesThe accounting system we use today started in Venice in renaissance period over 520 years ago. The trade business increased hugely during this time and all the financial recordings had to be written down to help people see how their business is doing. During that time in 1494 the first book about was published in accounting by Luca Paciolli and was called â€Å"The Collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality†. He was called â€Å"The father of Accounting† and most of his describedRead MoreEffect of Accounting Concepts on Financial Statement1735 Words   |  7 PagesTHE E FFECTS OF ACCOUNTING CONCEPTS ON FINANCIAL STATEMENT 5.1 ENTITY CONCEPT The first accounting concept is entity concept. These concept shows accounts are kept for entities and not the people who own or run the company.   Even in proprietorships and partnerships, the accounts for the business must be kept separate from those of the owners. This is because what whatever amount the company owes to others is not the liabilities of the owners. The maximum amount that the owner is going to loseRead MoreAccounting Research: Advantages of Cash Flow1720 Words   |  7 Pagesdependent on accounting conventions and concepts/principles * Cash flow reporting satisfies the needs of all users better since cash flow is more direct with its messages. Some of the interested user parties are: * Creditors   -repayment of debts, overdue accounts * Management -cash flow reporting provides the type of information which decision should be taken re: relevant costs ( decision based on future cash flow) * Shareholders amp; Auditors -cash flow accounting and reportingRead MoreAdvantages and Disadvantages of Hstorical Cost Accounting1241 Words   |  5 PagesHstorical Cost Accounting Advantages and disadvantages of historical cost accounting, alternatives to historical cost accounting 2.1 Introduction Accounting concepts and conventions as used in accountancy are the rules and guidelines by which the accountant lives. The historical cost accounting convention is an accounting technique that values an asset for balance sheet purposes at the price paid for the asset at the time of its acquisition. The historical cost accounting is the situation