Accounting for Business: Concepts and Qualitative Characteristics of Financial Reports

This report on Accounting for Business discusses the accounting concepts used for preparing financial statements, such as accrual, economic entity, going concern, matching, and conservatism. It also covers the qualitative characteristics of financial reports, including relevance, faithful representation, and freedom from error. The report focuses on TESCO as an example and includes references for further reading.

Accounting For Business

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK ..............................................................................................................................................3
A) Accounting concept which is used for prepare the financial statements...............................3
B) Qualitative characteristics of financial reports.......................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
The term accounting is explained as the process of recording financial transactions of an
organisation for analysing, summarizing and reporting all transactions to monitor and control tax
collection entities. Each organisation formulate an individual department for manage all
accounting transactions in an organised manner. Corporate financial statement considered as
written records which convey monetary transactions and business activities (Arad and et. al.,
2019). The selected organisation for this report is TESCO which perform business at global level
so this is important for management to record and view all financial transactions for analyse
overall profits of business. Moreover, this report highlights on different concepts of financial
statements and also on the qualitative characteristics of financial-reports which make information
more useful.
TASK
A) Accounting concept which is used for prepare the financial statements
Accounting refers to summarize and demonstrate all financial information which is used
for prepare the financial information that results to formulate appropriate business transactions.
This also reports about the operating profit and value of business to stakeholders some of the
financial concept for formulate financial statements are mention as follow:
 Accrual concept- Financial-accounting is based on the accrual basis because this is
highly accepted by the management. In the context of TESCO, accrual as well as cash

basis both are adopted by the authorities. Cash basis is recorded only when there is a
transactions is done through use of cash. Further, accrual basis consider transaction is
record when transactions occur and revenue is identified. To use accrual concept TESCO
authorities improve their automated system to improve company efficiency.
 Economic entity concept- This concept aids management for improve overall efficiency
by separate owners from organisation and also it not record personal transactions for
business (Bailey and Samuels, 2018). TESCO use economic entity concept because it
improve financial statement efficiency by list organisation as public limited organisation.
 Going concern concept- According to the going-concern concept this is understand
business will remain among organisation for long period and this also enhance revenue
by induce all transactions in accurate time. Also, going-concern concept is implemented
through provide the training to manager for perform all task and manage them at same
time-period.
 Matching concept- TESCO consider that matching concept relates with all those
expenses which is related with the particular income and that is recorded at same time-
period. To implement or apply matching concept TESCO use and understand all those
perspectives which improve knowledge related with financial statements or transactions
(Kulikova, 2016).
 Conservatism- Revenue or financial transactions are recorded only when this is certain
or reasonably that it add money in the future. Double entry system is the heart of
financial-accounting and this refers to implement two different aspects of same values.
With consists of all material transactions this is easy for investor to manage work in a
proper manner by engage all individuals in a particular manner.
The financial statements of all business and this consists towards all those perspectives which
manage work in a particular country by follow the standard format and accounting principles.
Also, it enable strategy related with the effective comparison to manage work with decided
positions. The accounting principles allow organisations to follow the regulatory and reporting
requirements which maximise overall efficiency of business by complete the work in an
organised manner. This also helps the persons for manage overall work through induce and
follow international accounting standards.

B) Qualitative characteristics of financial reports
Qualitative characteristics is differentiated into different perspectives which is
specifically, considered towards the improving the qualitative characteristics of business. Some
of the them which are more useful for TESCO to improve the information is mention as follow:
 RELEVANCE- With in context of accounting, the term relevance refers that this will
make changes for the decision-maker and also, relevant information is capable to make
different decisions which is made by user through understand the predictive value and
confirmatory value (Mardyana, 2014). Also, the main focus of relevance factor is to
generate better and effective outcomes by check and confirm predictions related with
business. Further, the main focus of relevance factor to increase information in financial
report is to minimise impact of materiality and nature of product or service. Example-
TESCO replace the equipment which is used by them from previous years because at
present time, equipment does not have right value for business.
 Faithful representation- The useful financial information must be faithful and this
includes the characteristics of complete, neutral and free from material factors. So it aids
towards formulation of economic phenomenon that is faithful as well as in a systematic
manner and this also helps for perform task with decided economic phenomena factors
(Seehausen, 2021). COMPLETE AND NEUTRALITY are two perspective and they are
used for increase the importance of information by ensure that information will not be
inappropriate that mislead management.
 FREE FROM ERROR- The set of financial reporting information is considered as true
and according to this it ensure that all information is free from error. Moreover, due to
change in the uncertainty and constraint of economy phenomena this is complex for
analyse that information is free from error. So to increase the information related with
financial reports for provide all ideas to the user Tesco consists that financial decisions
are formulate after appropriate estimation and judgements.
The primary purpose of TESCO to induce the qualitative characteristics is to offer additional
benefit related with financial-accounting and reporting system (Thompson and Washington,
2015). The fundamentals focus by Tesco account department is to demonstrate faithful and
relevant information to user because it helps to attract potential investor for business.

CONCLUSION
With understand of the above-mentioned report it is concluded that accounting perform
am important role for earn sustain and constant profits from business. Corporate financial
statements and it use aids organisation for attract potential investor to invest within business.
Also, this aids for implement accurate decisions by analyse the limitations related with financial
project. Further, accounting concepts such as accrual, matching concept, etc. aids an organisation
for improve their overall financial statements by implement them within the account related
system.

REFERENCES
Books and Journals
Arad, H and et. al., 2019. Modernism, Post modernism and Financial Accounting
Theory. Journal of Management Accounting and Auditing Knowledge, 8(32), pp.1-16.
Bailey, W.J. and Samuels, J.A., 2018. Analyzing Two Investments—An Instructional Case to
Introduce Basic Financial Accounting Concepts. Issues in Accounting Education
Teaching Notes, 33(4), pp.18-29.
Kulikova, L.I., 2016. Interpretation of corporate assets in line with accounting
concepts. Международный бухгалтерский учет, (21), pp.36-45.
Mardyana, R., 2014. Effect of Good Corporate Governance, Financial Distress, and Financial
Performance on Timeliness of Financial Statements Reporting. Jurnal Ilmiah
Mahasiswa FEB, 3(1).
Seehausen, J., 2021. Accounting Concepts in Company Law. European Company and Financial
Law Review, 18(3), pp.398-427.
Thompson, F. and Washington, H.L., 2015. Critical thinking skills and teaching accounting: A
comparative study. Journal of Finance and Accountancy, 19, p.1.
Wahyudin, A. and Solikhah, B., 2017. Corporate governance implementation rating in Indonesia
and its effects on financial performance. Corporate Governance: The International
Journal of Business in Society.
Wynder, M., 2018. Visualising accounting concepts: insights from Cognitive Load Theory for
English as a Second Language students. Accounting Education, 27(6), pp.590-612.