Accounting for Business: Concepts and Qualitative Characteristics of Financial Reports

Accounting for
business.

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Explaining various accounting concepts which are used in preparing the financial statements 1
Describing the qualitative characteristics of financial reports which makes the information
useful to the users of financial reports. ......................................................................................2
CONCLUSION................................................................................................................................3
REFERENCES ...............................................................................................................................4

INTRODUCTION
Accounting for business is the systematic process of recording, analysing, interpreting
and representing the financial information. It helps various external as well as internal users. This
report includes the discussion about the main accounting concepts used in preparation of
financial statements(Corazza, 2018). The accounting concepts are basic rules, assumptions and
conditions that explains the constraints in which accounting operates. There are various
objectives of the accounting concepts such as achieving the uniformity and consistency in
maintaining financial statements. It also includes the qualitative characteristics of financial
reports which makes the information useful to the users of financial reports.
MAIN BODY
Explaining various accounting concepts which are used in preparing the financial statements
Accounting concepts : While preparing the financial statements of the enterprise, it is
necessary to follow some common rules which helps in effectively maintain the standards of the
accounting. It is framed by the international accounting standard board(IASB). The different
accounting concepts that used in preparing the financial statements can be described as below:
1. Business entity concept : This concept states that the transactions of the business are
different from its owners. There is separate identity of the owner and its business. The
personal transactions and business translation of the owner are different. Due to this
reason, the personal expenses of the firm are different from the business. For instance,
when the individual invest the money in the business and record as a liability of the
business (Hariyati, Tjahjadi and Soewarno, 2019).. For instance, the owner has to pay
interest on drawings which shows that the owner and business both are different.
2. Dual aspect : It is the basic principle of accounting which states that there are some
common basis for recording the events of the business. The business transaction are
recorded at two distinct places. For every transaction, there are two aspects which is debit
side and credit side. It reflects that every event has common effects on the assets and
liabilities in such a way that overall total assets of the firm are equal to the value of the
total liabilities of the enterprise. In this, the equation is assets are equal to the total of
liabilities and capital.
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