Accounting Concepts and Qualitative Characteristics of Financial Reports

ACCOUNTING
FOR
BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
la) Accounting concepts used in the preparation of financial statements...................................3
lb) Qualitative characteristics of financial reports for users.......................................................4
CONCLUSION................................................................................................................................6
REFERENCE...................................................................................................................................7

INTRODUCTION
Accounting is the language for the business through which business transaction are
recorded in terms of money for the final user of the organization. The current report will
highlight business concepts, these are rules, assumptions, principles that help in recording
financial transaction. Users can get true and fair position through financial statements if these are
prepared by taking base of this accounting concept. Further, at the end this report will outline the
qualitative characteristic of financial report and how this financial report will be helpful for the
ultimate user of the business.
MAIN BODY
a) Accounting concepts used in the preparation of financial statements
Here are five accounting concepts which use in preparation of financial statements.
Business entity concept
Business entity concept is also called as separate entity which means business and its
owners are treated as separate entity. According to this concept business transaction are recorded
separately from owner’s personal transaction and this will lead to analysis the accurate
performance of business (Alvaredo and et.al., 2018). In addition to this also help in showing
accurate financial position. For example:
A business man took loan from bank for personal use this transaction is not related to business
are not recorded in books of accounts due to business is following separate entity concept.
Going concern concept
All financial accounts are made on going concern concept where the assumption will be
taken that business will run for long and continuous for indefinite period. This also ensure that
company is financially stable and has enough fund to meet obligation. If company is not
following this principle than it need to record all transaction and information on realization basis
in financial statements. For example:
A person who started a business and at the end of the year financial statements are prepared in
which profit has generated. That profit of the business transaction transfer to the next financial
year.