Accounting Concepts and Measurement Issues in Advanced Financial Accounting

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced financial accounting
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1ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Introduction............................................................................................................................2
1. Accounting concepts.......................................................................................................2
2. Measurement issues involved with conceptual framework.............................................3
3. Fundamental qualitative characteristics..........................................................................5
Conclusion.............................................................................................................................6
Reference...............................................................................................................................7

2ADVANCED FINANCIAL ACCOUNTING
Introduction
Purpose of this report is to study the annual report of AGL Energy Limited to deliver
examples and identify the accounting concepts used by the entity. The report will focus on
the measurement in accounting in accordance with the conceptual framework and the
measurement techniques used by AGL Energy Limited. In the next segment the report will
state the understanding regarding the fundamental qualitative characteristics associated
with relevance and faithfulness regarding the information presented in the financial
statements. AGL Energy Limited amongst the leading entities in Australia those are
engaged in integrated energy related products and services. it is engaged in merchant and
retail energy related business, upstream gas portfolio and power generation of assets
(Agl.com.au 2019).
1. Accounting concepts
It refers to basic principles, rules and assumption those are used as the basis for
recording business transactions and for preparing the accounts. Accounting concepts
presumes that for the purpose of accounting business organisations and he owners are
the 2 separate independent organisations. Recording for each financial transaction is
crucial to the business and for the creditors and investors. Accounting uses the regulated
and formalised system that follows the standardised procedures and principles. The
primary objective of accounting concepts is maintaining consistency and uniformity for
accounting records (Bebbington and Larrinaga 2014). These concepts are considered as
the basis for accounting. All the concepts are developed over decades from the
experience and hence they are accepted universally. Below are different accounting
concepts those are generally used while preparing the financial statements by the entities
–
 Accounting period concept – all accounting transactions recorded under the books
of the accounts are on assumption that the profits associated to these transactions
shall be ascertained for particular period. It is known as the accounting period
concept. It requires the profit and loss statement and balance sheet shall be
prepared at the regular intervals. This is important for various purposes like
ascertainment of financial position, profit computation and computation of tax.
 Going concern concept – this concept tells that business organisation will continue
carrying on the activities for the indefinite time period. To be more specific, it states
that each business organisation has the continuity for life. Hence, it is not expected
to be dissolved in the near future. This concept is considered as a crucial concept
as it delivers basis for revealing the asset’s value under the balance sheet (Francis,
Hasan and Wu 2013)
 Accrual concept – accrual concept states that something like an amount is yet to be
received or paid at the closing of the accounting period. It states that the revenues
are recognised while it becomes receivable. It makes a difference among accrual
receipt of cash and right to receive the cash is considered as revenue and as the
actual obligation and payment of cash is considered as expenses
 Matching concept – it states that revenue and the expenses made to earn the
revenue shall belong to same period for accounting. Hence, once revenue is
realised in the next step the associated expenses are accounted for. This is done
through using the actual concept.
 Accounting cost concept – it states that all assets reported in books of accounts at
the purchase price that includes acquisition cost, transportation and installation cost
and not at the market price. In other words, fixed assets like machinery, building,