Accounting Concepts and Qualitative Characteristics of Financial Reports

ACCOUNTS

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Accounting concept.....................................................................................................................3
Qualitative characteristics of financial reports............................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................1

INTRODUCTION
Following of accounting concepts and its inculcation will lead to have better presentation
and enhancement of its reliability and validity. This will act as base for making better decision in
association with the company. Likewise, financial statements are also the true reflection of the
company's financial performance and position. This essay will cover the aspects of accounting
concepts and characteristics of financial statements.
MAIN BODY
Accounting concept
These are the various rules and assumptions which is being kept in consideration by
companies while preparing their financial statements and making financial transactions.
There are various accounting concepts which is kept to be complied by companies:
Dual aspect:
It is one of the major and fundamental concept of accounting. As per this concept there
are dual effect of every transactions. This means that every transaction affect two accounts and
aspects in association with business (Mykolaiovych and et,al., 2020). It also includes accounting
equation in the form of Asset= Liabilities+equities which means that the value of assets will
always be equal to the sum of liabilities and equities. This can be understood with an example of
transaction like purchase of goods on cash. This transaction has dual effect in terms reduction of
cash as money is being given for the purchase of goods. However, the quantities of goods raised.
Accrual concept:
According to this concept all the expenses and income are to be recorded in the same
accounting period as well as they have been earned or incurred. However, this concept also said
that the recording of transactions will be performed whether cash has been paid or not in case of
expense and received or not in case of revenue (Porter and Norton, 2017). For example: Suppose
business ABC make a sell of goods on 20, March and its payment is not yet received which
means 15, April. Then as per accrual concept, revenue will be recognized in the financial
statements of March itself. It follows the matching concept under which revenue must be equal
to expenses.
Realisation concept:

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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Five accounting concepts.............................................................................................................3
Qualitative characteristics of financial reports which make information useful for users..........4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................1

INTRODUCTION
This report will examined about the various accounting concepts which are used for
preparation with financial statements and different application of these accounting concepts.
Along with this also discuss about the qualitative characteristics of financial report that could led
them for having basic information useful for users and make more proper financial concepts.
MAIN BODY
Five accounting concepts
While accounting is all about the rules, regulation and keeping the standards which could
led hem for having the some basic followed by each and every organization (Funck and
Karlsson, 2020). In such kind of activities this kind of principle which can get applied for the
organization which could help them for keeping their proper concepts and make sure for taking
their financial transaction. While here are some of the accounting concepts as follows:
Money measurement concepts:-
Accounting is usually deals with any things in organization and also determined about
those things which could help the organization for taking their future decision. This could be
biggest advantage of money which could denominate of actual value and resources and that
could also help them value of terms and items that could hold for the organization. The money
related worth of their assets then they can without much stretch put them into fiscal summaries of
organization whether accounting report or some other pay articulations.
Going concern concepts:-
This idea being trailed by each association light of fact that each organization needs that
they will lead their business for long lasting. In basic, there is no expectation for the organization
that they will close down soon. This idea state about the worth of resources organization which
will assist financial backers with realizing that organization has adequate resource and it could
not be going to close later on (Greenwood, 2020). Investor that could play their basic concepts
and make sure for taking risk and that could also help the for taking the value for which the rules
and regulation can be followed.
Dual aspect concept
According to the standards of bookkeeping it has been expressed that each exchange has
two viewpoints and both will affect the asset report of the organization. For example, on the off

Financial Reports

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
a. Accounting Concepts for preparing financial statements........................................................3
b. Qualitative characteristics of financial reports:.......................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................1

INTRODUCTION
The essay is about the accounting concepts and characteristics that are related to financial
statements. The essay covers the accounting concepts required for preparing financial statements.
It also consists of the qualitative characteristics to enhance the information of financial statement
for purpose of decision-making process for company and investors.
MAIN BODY
a. Accounting Concepts for preparing financial statements
Accounting concepts are used as the rules and procedures for recording any event and
preparation of financial statement. Financial statement are the written records that states the
activities and financial performance of business (Hasanaj and Kuqi, 2019). The following
concepts are used for preparing financial statements:
Money Measurement Concept: Business use accounting for only those items that can
be expressed in monetary terms. Money is a measurable thing that makes business to record the
inflow and outflow of items easily. In running of business a company performs many activities
related to monetary or non monetary terms (Atshana, Hassana and Saeed, 2020).
For example: Sale or purchase of goods of €2500 can be measured in monetary terms and
hence they are recorded in the books of accounts. Likewise, sincerity, loyalty, of employees can
not be measured in terms of money. Hence, won't be recorded in books of accounts although
they affect the profit and losses of business activities.
Accrual Concept: Accrual concept states that the transaction should be recorded when it
happened irrespective of actual cash-flow of transaction is received. It means something that
becomes due especially when the transaction is made but money is yet to paid or received. The
accrual concept assumes that revenue is realized at the time of sale or purchase of goods
irrespective of when the cash will be received or paid (Christofzik, 2019).
For example: sale of good took place on 15/03/2021 and payment is not received until
20/07/2021. So the transaction must be included in books of 31/03/2021.
Conservatism: Conservatism concept means that a transaction will be recorded in books
only when it is certain that it will be realized in near future. It provides guidelines to accountants
on how to record the transaction with proper verification after recognizing the uncertainty

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accounting for business

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Discussion of five accounting concepts that are used to prepare financial statements................1
Discussion of qualitative characteristics of financial reports that make information useful to
users of financial reports..............................................................................................................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
In business, accounting is said to organised recording, examining, interpreting addition to
presenting financial information (Bebbington and Unerman, 2018). Accounting plays crucial
function in running an international business as it assists managers to track income as well as
expenditures, provide stakeholders with quantitative financial information and ensure statutory
compliance. The report highlights five accounting concepts which are used by corporates in
preparing financial statements. Further, it also discusses qualitative features of financial reports
which makes information useful to users.
MAIN BODY
Discussion of five accounting concepts that are used to prepare financial statements
Accounting concepts refers to set of general conventions which are utilised in businesses
as guidelines to manage accounting situations. Major purpose of accounting concepts in a
business is to maintain consistency together with uniformity in accounting records. Within a
business, accounting concepts are applied at the time of recording economic events addition to
preparing financial statements which is essential for all accountants to abide. Some accounting
concepts that are used by companies to prepare financial statements are as discussed:
Money measurement concept: As per the concept, all recorded transaction and events are
measured in terms of money that is local currency monetary measure unit. It takes money as
common parameter to measure organisational performance (Seehausen, 2021). The concept
guides accountants to records only those events or transactions in financial statement that could
be expressed in monetary value. It eases communication among business management and
stakeholders through presenting values in monetary terms. For example, product durability,
employee skill level, in-house brand value and expected resale value of patent are some items
which are not recorded in financial statement as they cannot be expressed in money terms.
Business entity concept: The concept says that all transactions related to business are
separately recorded from those of owners along with other businesses. While preparing financial
statement, corporate and its owners are treated as separate and distinct. For instance, owner of an
entity personally acquires office building as well as rent spaces in company at 4100 £ per month.
As per the concept, rent expenditure is recorded in financial statements as valid expense to entity
and taxable income to owner.
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