Accounting Concepts and Qualitative Characteristics of Financial Reports

This report covers accounting concept which is used to prepare for financial statements and characteristic of qualitative financial report that makes information useful. It defines accounting concepts like money measurement, going concern, business entity, and accrual concept. It also discusses qualitative characteristics of financial reports like comparability, relevance, understandability, and verifiability.

Accounting for Business
Table of Contents

INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
Define accounting concepts used in preparation of financial statements along with examples................3
Discuss qualitative characteristics of financial reports that make information useful..............................4
CONCLUSION...........................................................................................................................................5
REFERENCES............................................................................................................................................6

INTRODUCTION
The term accounting is procedures for recording of all transactions related to financial
which is pertain to their business organizations (Bui and Fowler, 2019). It must include
summarizing, analyzing and measuring the financial performance of a business organization and
tax collections entity. It can be defined all financial transaction related to the individuals or
business organizations define pre-determined rules and procedures in way of transaction. This
report covers accounting concept which is used to prepare for financial statements and
characteristic of qualitative financial report that makes information useful.
MAIN BODY
Define accounting concepts used in preparation of financial statements along with examples
Accounting concepts are just assumptions or conditions which accounting financial
records and statement should be used and accounting concepts are a set of general gathering
which can be used as guidelines rules and regulations will determine or dealing with accounting
situations. It should be presented in a very significantly manner which is to be easily
understandable for the users and it is relevant information should be provided to their user.
Accounting concepts are used in accountancy for various rules and regulations and recording
their preparation of financial statement that all accountants stand. Key accounting concepts are
used to prepare financial statements which are described below:
Money measurement concept: This concept recognizes that they normally deal with
various items that are capable of being expressed in terms of their money or in monetary terms. It
gives the best advantage that it is useful to express wide of broad variety of a business
organizations (Chernyshova and Simakov, 2020). These concepts are measured in terms of
money so it can be concluded in balance sheet. For example, sincerity, loyalty and honesty of
particular workers are recorded in books of accounts but this cannot be measured in terms of
money and monetary terms.

Going concern concept: This type of concept which holds business operations will
continuous in the upcoming years. It is assumed that business organizations will remain for a
long period of time and hold their income for a different period. For instance, a firm purchased
plant and machinery of rupees 100000 and its lifespan is 10 years. According to this concept
each and every year has spent some amount of money will be shown for the expenditure and the
shown balance amount as an asset.
Business entity concept: This concern is quite separate because in this concept it is
renowned from legal positions which may be difference between business and their managers.
This entity is required to build financial statements and record their business transactions
accordingly (Cooper, Robson and Bottausci, 2020). For example, manager invest money in
business and it is recorded as a liability to business as well as when manager takes away from
business cash for personal use it is not treated as a business expenditure.
Accrual concept: This concept should be recognized where they can income and
expenditure identify within a specific period of time until half a year. For instance, organization
sell goods for 55000 and payment is received and till 10th April amount is due and payable of
the following the date sales 25 march. It was included in income for the year of 31st march 2005.
Dual aspect concept: This accounting concept has a two sides both sides is debit or
credit which will affect their balance sheet. For example, goods are purchased for cash as a two
steps which are giving of cash and receiving of goods.
Discuss qualitative characteristics of financial reports that make information useful
Comparability: It is one of the best characteristic of a qualitative which enables users to
identify and understand the similarities and differences of dissimilar among their various items
(Luyang and Ghani, 2019). It is more useful to identify their reporting systems which is
compared with the similar information about other organization and similar information about
other business organization with similar information about the same entity for the another period.
It enables that comparison within the business organizations or across their entity. This
information must be comparable to the financial information is presented the accounting period
so that the users can identify their financial reports on financial position of reporting business
organization.

Relevance: This information must be relevant about the users which are needed for other
information’s are interference about their economic decisions and it must be involved for
particularly relevant information for statement could influence their economic decisions. It is
very useful information for financial decision making procedure as they are accounting
information can we provide about their past events for their upcoming events taking actions with
the possible upcoming events.
Understandability: This requires financial information’s to their users who understand
each and every knowledge about their business organizations and information are clearly and
concisely understand. This information can be readily understand about user of financial
statements which means that should be clearly presented and the extra information also included
in the supporting notes (Salterio, 2020).
Verifiability: It is helpful to a short users are represent their information to purposeful
information and financial information should be provided or supported evidence for independent
individuals can share them with better information is faithfully represented or not. Accounting
information have a different knowledge about their observations and it isn't about their way that
doesn't of a company are correct or not.
CONCLUSION
From the above information, it has been concluded that accounting is a process of
identifying, summarizing, analyzing qualitative financial activities and communicate about their
financial report in the business organization. It is also provide various information provide about
business and their stakeholders through systematic maintenance in books of accounts and
basically about their information system. It is an important for business organizations to running
a smooth functioning of business and records their business transaction. This report covers
various topics which are named as accounting concepts are used to prepare financial statements
and qualitative characteristic of financial report that makes in providing useful information

REFERENCES
Books and Journals
Bui, B. and Fowler, C. J., 2019. Strategic responses to changing climate change policies: The
role played by carbon accounting. Australian Accounting Review. 29(2). pp.360-375.
Chernyshova, S. and Simakov, K., 2020. Improving the Management Accounting System
through Strategic Budgeting in an Industrial Enterprise.
Cooper, D. J., Robson, K. and Bottausci, C., 2020. Accounting practitioners, work and
organisations. In The Routledge Companion to Accounting History (pp. 307-345).
Routledge.
Luyang, H. and Ghani, E. K., 2019. Management accounting reporting practices among Chinese
enterprises: a compliance analysis.
Salterio, S., 2020. Accounting for the Unaccountable–Perspectives on the Economic Effects of
the Coronavirus 19 Pandemic. Available at SSRN 3581243.