Accounting for Business: Concepts and Qualitative Characteristics of Financial Statements

ACCOUNTING FOR
BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
a) Describing five accounting concept used in preparation of financial statements with
example.......................................................................................................................................1
b) Discussing the qualitative characteristics of financial statements that make information
useful for users............................................................................................................................2
CONCLUSION ...............................................................................................................................3
REFERENCES................................................................................................................................5

INTRODUCTION
Accounting for business refers to the procedure of recording, analyzing and interpreting
essential information for the purpose of decision making. In current scenario it is important fro
the company to have effectual pattern of accounting procedure so that better efficiency can be
obtained. The current report will involve the five accounting concepts and qualitative
characteristics of financial statement useful that make the information useful for users.
MAIN BODY
a) Describing five accounting concepts used in preparation of financial statements with example
Accounting concepts are crucial for the purpose of applying appropriate rules &
principles while formulation of financial statement so that relevant & accurate information can
be derived (Brown and et.al., 2019). It includes business entity, going concern, accounting
period , realization and dual aspect are some of the five concepts which are as follow:
Business entity Concepts
It is taken into considerations while formulating financial statement of organization.
According to it, firm and its owners re different entities so that both transactions should not be
recorded as single. For instance- if organization is getting fund from the owner then it is
recorded in the liability side as firm is liable to pay its owner. On the other side if the
company's money is utilized by proprietor for personal utilization then he is obligated to pay
off back. This provides assistance in analyzing accurate cash in & out so that profitability
measurement can be done corrective.
Going concern concept
according to this specific concept of accounting it is stated that business will continue
to carry its operational practices that facilitates preparation of financial statement. On the basis
of it firm charges depreciation on fixed assets, creates trustworthiness among shareholder that
they will get return for longer duration. For example- Company becomes able to treat purchase
of assets as not expense for judging its actual capacity to earn profits in the future. This
accounting concept assist in achieving longer term focus for continuing operational practices.
Accounting period
It is concerned with recording business transaction of specified period so that
profitability of particular duration can be measured. It is a essential ton implement so that
balance sheet & profit and loss account can be prepared for specific period in order to compute
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