Accounting Concepts and Qualitative Characteristics of Financial Reports

Accounting for Business

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Five accounting concepts used while preparing financial statements..........................................3
Qualitative characteristics of financial reports which makes information useful to users of the
financial reports............................................................................................................................4
Conclusion ......................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Accounting for business refers to making financial statements in terms of income
statements and balance sheet so that can be recorded accounting or business transactions. It is
helpful in running business effectively (Garrett, 2018). This report will discuss accounting
concepts used at the time of financial statements preparation. Further will evaluate qualitative
characteristics of financial reports
MAIN BODY
Five accounting concepts used while preparing financial statements.
Business entity concept:
As per this accounting concepts business and owners are different and should be
considered as separate entity. They are the independent and should not be considered as one. So
that is why transactions of business and its owners should be considered as separate only.
Example, when the owner is investing his money in the business then it is termed as the liability
for the business. And when owner takes cash from the business for his or her personal use then it
is not marked as business expense. This concept is the base of accounting.
Money measurement system:
As per this accounting concept all the business transactions has to be in the terms of
money which is the currency of the country (ACCOUNTING CONCEPTS., 2020). Those
transactions are recorded in the accounting book which can be expressed in money terms.
Example Rent paid £ 5000, sales of goods £ 100000. as these examples are in money terms so
they can easily get recorded in the books of accounts. As per this system accountants gets
guidance about what they have to record and what they cannot record. If the transactions which
is recorded in terms of money than accounts will be understood easily.
Going concern concept:
According to this concept, business will continue their business activities for long period
or indefinite time period. It can be said that business have long life and it will not going to
dissolve in the future. It is one of the important concept of accounting. It shows that in the
balance sheet assets are valuable. For instance, business can be tested on the basis of its profit