Five Accounting Concepts and Qualitative Characteristics of Financial Report

Assessment

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Five accounting concepts.............................................................................................................3
Qualitative characteristics of financial report..............................................................................4
CONCLUSION................................................................................................................................5
REFRENCES...................................................................................................................................6

INTRODUCTION
Business accounting refers to the systematic, recording, analysing, interpreting and
presenting of financial information (Collis, Holt and Hussey, 2017). Accounting helps in
determining financial position of an organisation. Five accounting concepts used in the
preparation of financial statements is discussed. Qualitative characteristics of financial report
which make information useful to users is described.
TASK
Five accounting concepts
Accrual concept
According to this concept, transaction should be recorded at the time when they occur, do
not wait for the cash to be receive. Accrual concept help to ensure good information about
financial health of an organisation. This concept is useful in determining financial position of a
company. It is useful in business analysis and better plans can be made for growth of company. It
is used by small businesses and individuals to maintain proper record (Bergmann, Fuchs and
Schuler, 2019). Example of accrual concept is, cash flow statement. In cash flow statement,
income and expenses are recorded when they occur.
Money measurement
Money measurement concept means an organisation should record events or transactions
which can be measured in terms of money. Only those transactions should be recorded in
financial statement which has monetary value. Money measurement concept is important
because all the transactions are recorded in financial statements, it becomes easy to compare the
results. It forms a basis of evidence which can be used in legal matters (Budhathoki). For
example, profit and loss account, it helps in comparison and transactions which have monetary
value are recorded.
Going concern concept
Going concern implies that business entity will continue its operation in future and do not
discontinue operations due to any reason. Going concern assumption refers to prepayment and
accrual of expenses. If a company is assumed to be going concern, then certain expenses may
have deferred in financial report. Going concern concept is important for shareholders as it
demonstrates the stability of entity (Moore, 2017). This assumption affects stock price of
company; it has the ability to raise capital. Going concern provides basis for measuring income