Accounting for Business: Concepts and Qualitative Characteristics of Financial Reports

ACCOUNTING FOR BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASKS.............................................................................................................................................1
a) Five accounting concepts used in the preparation of the financial statements illustrated with
the relevant example....................................................................................................................1
b) Qualitative characteristics of financial reports making the information more useful for the
users.............................................................................................................................................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Financial accounting in the business is one of the most significant function that shall be
assisting in the reporting of the financial performance and the profitability of the business. This
information is useful for the various internal and the external users of the business. The current
project report shall be depicting the various accounting concepts that are to be followed for the
accurate results. Apart from that it shall be representing the qualitative characteristics of the
financial reports.
TASKS
a) Five accounting concepts used in the preparation of the financial statements illustrated with
the relevant example
Business entity concept
This concept states that the owner and the business are two separate persons and
independent entities and the routine transactions shall be in the name of the business. This is the
major reason that if the owner contributes the capital it is booked as the liability of the business
and if they withdraw the amount they are not business expenses rather are considered drawings
and deducted from capital. Also, all the assets are purchased in the name of the company.
Example:- If the company purchases the furniture and the plant and machinery then these assets
are purchased in the name of company and belongs to the business and not the owner.
Dual aspect concept
This concept of accounting suggests that every transaction of the entity has the dual effect
one is the debit and the other is the credit (Wiedenhofer and et.al., 2019). The recording in the
books of accounts has to be done considering the dual aspect of all the transactions completing
the double entry. This shall also satisfy the fundamental accounting equation that is Assets =
Liabilities + Capital and hence match both the sides of the balance sheet of the company.
Example:- Suppose a transaction is undertaken which is the goods are purchased for cash in the
company. In such case since cash is received against the sales so the cash account shall be
debited and on the contrary the sales of goods account shall be credited.
Going concern concept
The concept shall be specifying that the business shall be continuing for the foreseeable
future of indefinite period and the assumption is that the business shall not be dissolving in the
near future of the company. This means that the activities are to be carried out on a continuous
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