Accounting Concepts and Principles: A Comprehensive Guide

ADVANCE FINANCIAL
ACCOUNTING

Contents
INTRODUCTION.................................................................................................................................................3
DESCRIPTION OF ACCOUNTING CONCEPTS............................................................................................4
 SEPARATE LEGAL ENTITY/ BUSINESS ENTITY:............................................................................4
 MONEY MEASUREMENT PRINCIPAL:...............................................................................................4
 ACCOUNTING PERIOD:........................................................................................................................5
 HISTORICAL COST:...............................................................................................................................5
 FULL DISCLOSURE:..............................................................................................................................6
 GOING CONCERN CONCEPT:............................................................................................................6
 CONSERVATISM/ PRUDENCE:...........................................................................................................7
 DUAL ASSPECT:.....................................................................................................................................7
 MATERIALITY:.............................................................................................................................................8
CONCEPTUAL FRAMEWORK AND ISSUES RELATED WITH MEASUREMENT...................................8
FUNDAMENTAL QUALITATIVE CHARACTERSTICS..................................................................................9
CONCLUSION:..................................................................................................................................................10
REFERENCES:.................................................................................................................................................11

INTRODUCTION
This report shows all the accounting concepts and principals. It focus on evaluate and explain
the accounting concepts and principles in order to emerge conceptual framework and its
impacts on various accounting practices. This assignment will briefly explain and understand
the Australian accounting regulatory framework and the conceptual framework. The following
report will be based on an Australian listed company that is Iluka limited. The accounting
concepts will be identified and briefly explained with the help annual reports of Iluka limited,
Australia. The accounting principles will also give an example from iluka limited.

DESCRIPTION OF ACCOUNTING CONCEPTS
The accounting concepts are those rules and assumptions which a business or a firm should
follow while recording the transactions and preparing different accounts. Certain rules and
principles have been followed to maintain discipline, consistency and uniformity in the
financial records or financial books. Hence to record the different kinds of nature of
transactions the organization needs to follow some of these concepts and principles
(Measurement, 2017). These principles and concepts are briefly explained and discussed
below:
 SEPARATE LEGAL ENTITY/ BUSINESS ENTITY:
This principal states that the business is separate from its owner, manager and creditor. All
the transactions are recorded from business point of view and the point of view of owner is
ignored, for example: bought a thing from reliance and not from Ambani. The money which is
put in to the firm or the business is known as capital. It is assumed that a loan is taken by the
business from the owner which is known as capital. The interest paid to the owner on capital
by the organization is an expense for the business because it reduces the profit of the
business. (Wang, Dou and Jia, 2016). At the same time, it increases the capital of the owner.
The amount which is used for personal use by the owner is called drawings from the
business. Hence the above given statement states that according to this principal business is
separate and different from the business or the firm.
 MONEY MEASUREMENT PRINCIPAL:
The transactions and events which are done or are expressed in terms or basis of money are
only recorded in the financial books. Any event or transaction will not be recorded in the
financial books until it is measured in terms of money. For example: any kind of fights or
disputes in the firm like any dispute between HR and management will not be recorded in the
financial books. Strike is beginning. This has not been proofed that the competition has given
a competitive product in the market (IASB's restructured Conceptual Framework raises thorny
issues, 2017). If a businessman has fifty thousand in cash, five machines, hundred chairs and
twenty fans all things cannot be recorded in the financial records or transaction books as they
are not expressed in basis of money such as cash 50 thousand, machines 20 thousands
chairs 10 thousand and fans 80 thousand. Hence those transactions, events or things which