Accounting Concepts and Qualitative Characteristics of Financial Reports

Accounting for Business

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Discussing five accounting concepts that used in the preparation of financial statements along
with the examples........................................................................................................................1
Assessing qualitative characteristics of financial reports that make information useful for
financial report users...................................................................................................................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Business accounting is an action of assembling the information, scrutinizing the data and
recording them in proper format for drafting the financial reports. The present project will
include the accounting concepts used in the preparation of financial statements. Further the study
will outline the various qualitative characteristics of financial reports.
TASK 1
Discussing five accounting concepts that used in the preparation of financial statements along
with the examples
Business entity concept: In accounting this concept implies that owner and entity is
different. The stated line conceptualized, the transactions related to the organization and the
proprietor will be recorded separately (Seehausen, 2021). Moreover, it ought to disclose only
business related information and others will be ignored. Without this concept, the records of
multiple entities would become quite difficult to distinguish the financial or taxable results of a
single business. For example: when the owner of Amcor plc need to withdraw the money for its
personal use from bank, he is not entitled to record this in the books of organization.
Money measurement concept: It is also known as Measurability concept, which states
that company should record only monetary related transactions. Therefore, the data related to
non-monetary nature is ignored irrespective of its urgency. For example: when the employee
has escalated the revenue generation with the interpersonal skills, its art of work will not be
included in the accounts as its of non-monetary nature.
Dual aspect concept: This concept defines that every business transaction will have two
aspects of recording in two different accounts. This concept is derived from the accounting
equations which states that:
Assets = Liabilities + Equity
The accounting equation denotes that total amount of asset should be equal to the part of
liabilities and equity. If management wants to have its financials audited, it must accept this
concept and maintain its records using double-entry accounting. This is the only format that
auditors will accept if they are to issue opinions on financial statements (Wiedenhofer and et.al.,
2019). For example: when Aviva plc is ordering raw material or inventory on credit for further
use, they will show the dual impact. Therefore, on asset side it will have a positive impact as the
inventory is adding and its liability side will also depict increment with same amount.
1