Accounting Concepts and Qualitative Characteristics of Financial Reports

ESSAY

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

INTRODUCTION
Accounting concepts are the base and fundamental which every company must need to
consider so that the efficient operation and recording of financial transactions would be possible.
Likewise, preparation of financial reports and its use in the context of the user will lead to better
under-stability and decision-making. This essay will cover the topic of accounting concept with
practical application along with characteristics in the context of concerned users.
MAIN BODY
Accounting concepts
These are the basic assumptions and rules and principles which are kept to be considered
while recording business transactions and preparation of financial accounts.
The major accounting concepts are:
Accrual concept:
It is one of the major accounting concept which states that income should match with the
revenue. It is also known as matching concept. This concept is mainly concerned with the
recording of revenue and expenses with the occurrence of transactions irrespective of fact that
the payment is received or not (Barker and Teixeira, 2018). As it is a matching concept which
always work on the fact that revenue and expenses must be recognized in the concerned period.
For example suppose company ABC limited sell some goods on 20, march and allow the
customer to make payment after 20 days. And in this case suppose if the customer is a good one
then it will make payment on due date and even before that. In this case, ABC will record
income in March itself because of raise in sales with a corresponding increase in debtors. This is
called accrual and matching concept.
Consistency:
This is also a major accounting concept which direct and assist the companies to be
consistent with the following of same accounting method. As per this principle if a company
chooses one accounting method for the preparation of its financial accounts then it must be stick
to it (Wang, 2018). This need to be consistently followed so that the making of comparison with
regard to financial statements and performance would be easy. The best example would be the
following of method of depreciation towards fixed assets that could either be written down value