Advanced Financial Accounting

ADVANCED FINANCIAL ACCOUNTING
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Contents
Introduction................................................................................................................................3
Accounting concept....................................................................................................................4
Conceptual framework of accounting and measurement issues................................................6
Fundament qualitative characteristics........................................................................................8
Conclusion................................................................................................................................10
References................................................................................................................................11
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Introduction
Financial accounting concepts are those concepts which are used in preparation, disclosure
and presentation of financial statements of business organisations. There are many points to
be considered while preparing and presenting financial statements like accounting treatment,
discloses and use of appropriate formats. Invocare Limited is the business organisation which
has been considered in this report. Invocare Limited is listed in Australia Stock Exchange and
is engaged in providing services of funeral homes. In this is report analysis of various
accounting concepts related to Invocare Limited has been undertaken. This report contains an
analysis of basic accounting concepts i.e. going concern, conservatism concept, etc. Another
section of this report includes an analysis of the conceptual framework and issue of
measurement in the figures of financial statement has been analysed and reported. The last
section of this report includes an analysis of fundamental qualitative characteristics that
should be presented in financial statements. Analysis of fundamental qualitative
characteristics defines relevance and faithful representation in the financial statement of
Invocare Limited.
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Accounting concept
There are some fundamental rules and regulations that are important for a business
organization while preparation of books of accounts and financial accounts. These rules and
regulations can be considered as building blocks for the accounting process and these rules
and regulations are also called accounting concepts. These are basic accounting concept that
will help the business organization to make sure that relevancy and accuracy in financial
statements and accounting process is maintained throughout the financial year (Henderson
et.al, 2015). Following are some of the accounting concepts along with the manner in which
management of Invocare Limited has followed such accounting concepts-
Accrual concept - There are two types of accounting that can be followed by any business
organization i.e. cash accounting and accrual accounting. Accounting standard issued by
AASB has prescribed to each and every Australian organization to follow the accrual basis of
accounting as it helps in following the concept of timeliness and matching concept. It is
important that the business organization is recording business transactions as they occur in
the organization. Apart from this contention, accrual accounting concept as its own advantage
of recording all business transaction whether cash is involved or not. This represents the
correct position of business organisation during the year and can be compared with other
business organisations. Delaying the process of recording a business transaction due to non-
receipt of non-payment of cash can have a negative impact on the accuracy of financial
statements.
Evidence of accrual basis of accounting in the financial statements of Invocare Limited can
be identified with the help of outstanding expenses, account payable and account receivables
at the end of the financial year (Hoyle, Schaefer and Doupnik, 2015). Balances of accounts
payable and accounts receivable at the end of the financial year that sales and purchase made
by the business organization are recorded in financial statements irrespective of the fact
management has not received cash against sales and made payment against purchase.
Conservatism concept- Conservatism concept is one of the most important concepts that are
used by the business organization in the recording of revenue and expenses. According to this
concept, all the revenue should be recorded only when there is an assurance that such revenue
will be collected from the customer and all the expenses should be recorded even when there
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