Accounting Concepts and Qualitative Characteristics of Financial Reports

ACCOUNTING FOR BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASKS.............................................................................................................................................1
a) Five accounting concepts assisting in the preparation of the financial statements illustrated
with suitable examples.................................................................................................................1
b) Qualitative characteristics of the financial report making it useful for the users of such
information...................................................................................................................................3
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Accounting for the business is one of the significant aspects that shall be analysing the
end result of the performance of the company during the year in terms of profitability in the
business. The current project shall be highlighting the fundamental accounting concepts that
assists in the preparation of the financial statements and accordingly the reports that are formed
possess the qualitative characteristics. The report shall be presenting how such characteristics
help the users of the financial information.
TASKS
a) Five accounting concepts assisting in the preparation of the financial statements illustrated
with suitable examples
Matching concept
The matching concept of accounting states that the revenues that are earned in respect of
some job and against it the expenditure that are made for earning such revenues are to be
accounted for in the similar accounting period of the company. This shall be providing the
realistic view of the profitability in the business by the incorporating the revenues and the
expenses belonging to the particular period in accounting (Ritonga, 2020).
Example:- If the company has the policy of paying 10% commission on the sales to the salesman
and suppose in January the sales are executed for 10000. Then matching with the revenues the
expense of 1000 sales commission shall also be accounted for in January despite the fact that the
payment of it is made in February. This shall be giving the accurate profitability of the company
at 9000.
Dual aspect concept
This concept of accounting states that every transaction has the dual aspect and both the
aspects are to be separately recorded in the books of account. So for every transaction there is
debit account and the equal and opposite credit account that has given rise to the fundamental
accounting equation that is Assets = Liabilities + Capital. This shall be leading to the balancing
and the matching of the trial balance and the balance sheet of the company. This completes the
double entry system of accounting.
Example:- Suppose the capital is brought in by the owners in the form of cash, the dual aspect
are to be recorded for this transaction. In this the cash account shall be debited and increased as
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