Accounting Concepts and Measurement in Financial Accounting

Advance Financial
Accounting
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Contents
Introduction........................................................................................................................3
Description of accounting concepts...................................................................................3
Conceptual framework and some issues related with measurement...............................6
Fundamental qualitative characteristics............................................................................7
Improving quality characteristics.......................................................................................8
Conclusion.........................................................................................................................9
References.......................................................................................................................10
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Introduction
The overall assignment is concerned with financial accounting that concerns with the overall
summary and analysis of the report in terms of a monetary measure of a venture. The overall
monetary activities are measured by preparing an overall financial statement of a company.
The overall study will give focus to Breville group limited that is an Australian that deals and
leads supplier small electrical appliances. They deliver kitchen products to above 50 countries
around the world. All the concepts of accounting will be discussed in the following report.
Annual report of the company helps in generating overall framework and related issues in
measurement.
Description of accounting concepts
The accounting concepts should be followed by the organization to prepare overall financial
reports in an appropriate manner. Accounting concepts are the sum of basic assumption on
which overall accounting of any firm based upon. The overall objective is to maintain the
consistency and handling book of account so that overall financial statement can be easily
maintained. Hence the various accounting concepts are as follows.
Business entity concept
According to this business and business person are two different things. The overall
accounting process is done for the business, not for a single business person. This concept
applies for both corporate and non-corporate sectors of the organization (Rossi, et al., 2016).
A latest and simple example of this, whenever a businessman buys goods and different
services for operating the business activities then these things are considered not considered
as business expenses. while if the owner of business invests some amount of fund then it is
recorded as the liability of the company. So business and business person are independent of
each other (Christensen, Nikolaev and Wittenberg‐Moerman, 2016).
Dual aspect concept
The dual aspect concept states that every business transactions need to require the two
different types of accounts. Here assets = liability + equity. The overall accounting equation is
made visible where the total amount of assets is equal to the total amount of liabilities.
Money measurement concept
This is the common concept also known as measurability concept. Which means only
transaction and events that are incapable of being measured in the monetary value are
recognized or considered as financial statements. All the transactions and different events
that are recorded in the financial statement done must be reduced in a particular unit in the
form of monetary currency (Dutta and Patatoukas, 2016). However, if any material
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transaction or event is not recorded or it is failing to meet the overall measurability criteria
then this transaction would be disclosed in supplementary notes of the overall financial
statement. This helps in better understanding of all the performance of the final statement and
position of the entity (Edwards, Schwab and Shevlin, 2015). The overall use of the reasonable
estimate is very crucial in preparing the overall financial statement. There is also some
transaction that cannot be recorded in monetary terms such as the loyalty of workers honesty
towards works and sincerity of the employees. This also helps in identifying the loopholes
present in the company (Pan and Seow, 2016).
Going concern concept
This accounting implies that the business which will continue the future operations to stop due
to bankruptcy and its assets or gone for the liquidation is considered as going concern
concept. This concept is very helpful in making the overall financial records of the report. This
also ensures investor about their income that they have invested in the business organization
(Dyckman and Zeff, 2015). Let’s take example of the manufacturer company of electrical
appliances as if the government imposes different types of import, export marketing and sales
tax on the company in the country, if company x is the only one product at the company
actually manufactures then the company will not entertain this concern of manufacturing
(Jayaraman and Milbourn, 2014).
Accounting period concept
It is a particular span of time covered by sets of financial statements. Concepts help in overall
estimating profit and loss for the particular final position of a business in a particular time
period. Various accounting periods can arise the problem of calculation of profits expenses
and income etc. So in this business or divided into shorter periods of equal length so that the
profit and calculation can be made easily (Rodríguez Bolívar, et al., 2016). Generally the
accounting period is of 1 year and it is not necessary that it would be from the calendar year
for example from February to January from July to the next June. The bank and other
financial institutions can analyze the overall business performance of this concept.
Accounting cost concept
The cost principle is basic guidelines in accounting. It states that the assets should be
recorded at the time they are acquired. For example, a long-term asset purchased for the
amount of $500 then the amount will be recorded at $500. But for the same asset if it is
purchased at the down payment of $20 then it has to be paid $30 within a particular period of
time with a proper rate of interest. At the time after interest speed acid will also be recorded at
$50. This is the proper example of accounting cost concept.
If the form is not paying anything for an acid then the record will not be shown in the book of
accounts. A fixed asset in the company such as overall machinery furniture construction rent
paid is recorded at the actual price that is paid for them.
Dual aspect concept
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