Corporate Accounting: Principles and Concepts

This assignment provides a comprehensive overview of the principles and concepts of corporate accounting. It discusses the importance of accounting period, double entry system, and other key concepts. The case of Mirvac Group, a leading real estate firm in Australia, is used to illustrate the impact of these principles on businesses. The assignment also explores the fundamental qualitative characteristics of financial data.

Corporate Accounting

Table of Contents
INTRODUCTION......................................................................................................................................3
DESCRIPTION OF ACCOUNTING CONCEPTS.................................................................................3
 SEPARATE LEGAL ENTITY:......................................................................................................3
 HISTORICAL COST:....................................................................................................................4
 GOING CONCERN CONCEPT:.................................................................................................4
 MONEY MEASUREMENT PRINCIPLE:....................................................................................5
 ACCOUNTING PERIOD:.............................................................................................................5
 DOUBLE ENTRY SYSTEM:........................................................................................................6
 CONSERVATISM/ PRUDENCE:................................................................................................6
 FULL DISCLOSURE:...................................................................................................................7
 MATERIALITY:..............................................................................................................................7
CONCEPTUAL FRAMEWORK AND ISSUES RELATED WITH MEASUREMENTS:....................8
FUNDAMENTAL QUALITATIVE CHARACTERISTICS:.....................................................................9
CONCLUSION:.......................................................................................................................................10
REFERENCES:.......................................................................................................................................11

INTRODUCTION
The following assignment shows all the accounting principles and concepts very clearly.
The accounting concepts and principles are briefly discussed and shown below. The
principles and concepts of accounting are used by the organizations to calculate and
prepare their financial books and records. The project also discusses the Australian
listed company Mirvac group. The Mirvac group is a leading firm working in the field of
real estate in Australia. The impacts and effects of the accounting principles and
concepts on the Mirvac group will be discussed in the following report. The examples
from Mirvac group will be given in the principles. The preparation and evaluation of
principles will be shown in the following assignment with the help of annual reports of
the Mirvac group.
DESCRIPTION OF ACCOUNTING CONCEPTS
The group or set of rules and policies which are followed and applied by an organization
while preparing financial books and recording the different transactions in different
accounts. To maintain uniformity, firmness, and flexibility in the records of transactions
these set of regulations that is accounting principles and concepts are to be followed
(Thuronyi and Brooks, 2016). There are different types of principles and concepts
registered under the companies act, some of these principles are briefly discussed and
shown beneath:
 SEPARATE LEGAL ENTITY:
The concept explains that the organization that is the business and the owner of the
business are distinct from each other, that is they are different and are not considered
same like business and businessman are totally separated from each other. Thus even
the transactions and any financial entry is done for the business and not for the
business man, for example: if Mirvac group purchases goods it would be recorded from
the point of view of Mirvac group and not from the point of view of the CEO. The equity
invested by the businessman or the owner is called capital that is like a loan for the firm
or the organization. Thus the interest paid to the proprietor on capital is referred to as

an expense for the organization as it reduces the profit of the firm. Just like that the
money used for personal use by the owner is known as drawings. Thus it is hereby
clarified that the proprietor and the business are two different parties and due to which a
company has its own seal (Paolella and Durand, 2016).
 HISTORICAL COST:
The assets purchased by any organization or business are recorded on their original
value that is their purchase price, the price at which these assets were bought or
purchased is to be recorded in the financial books of the organization since the
purchase price was in the past this concept is named as historical cost. Any changes,
ups, and downs, or any kind of change in the policies will not affect the purchase and
recorded price. Hence the price at which the assets are recorded that is the historical
cost will never change. For example: if Mirvac group purchases any plant of five
hundred thousand dollars then it will be recorded in the records at the same price only
any changes in future in the market price or any increase or decrease in the selling or
market price will not make any effect on the recorded price that is the historical cost. But
the depreciation on that cost will be charged accordingly every year (Mehrotra and Ott,
2015).
 GOING CONCERN CONCEPT:
This concept states that the owners may come and owners may go but the company
goes and goes forever. That means the business when incorporated is not started to
wind up or close early, instead, it is incorporated to run lifetime, the owners and CEO's
of the organization, firm or business may change and come and go but the business will
not wind up (Lang, et al., 2018). As said above the business and owner are separate, so
even if the owner dies, gets bankrupt, goes insane, or is jailed, the business will not
stop it will continue for its lifetime, the new owner will come. As per this concept, the life
of the business is forever and hence the assets are also recognized for lifetime and
depreciation on those assets is charged for the whole of its life. Hence the firm or the
organization will not dissolve any time. For example, If Mirvac Group closes one of its
branch and continue their business operations in another branch, then the company is a

going concern because the closing down a small part of business does not harm the
company’s entire business operations.
 MONEY MEASUREMENT PRINCIPLE:
This concept states that any kind of transaction or fact or any situation that can be
disclosed in the terms or basis of money. Any event whether important or not important
for the business until are not expressed in terms of money or do not have any value will
not be recorded in the financial books or the financial records. For example: ten tables,
fourteen racks, twelve fans and four air conditioner, cannot be recorded in the financial
books because they are not in terms of money, but tables of ten thousand, racks of
seven thousand, fans of twelve thousand and air conditioners for fifty thousand can be
recorded in the financial records, as they are expressed in the terms of money (Kim and
Kim, 2015). Thus any kind of transactions or events that are not related to money or not
expressed in terms of money, for example, any disputes or strikes in the organization
are not expressed in terms of cash and hence will not be recorded in the financial books
or financial records. Hence it is stated and proofed that any kind of transaction that is
not related in terms of cash or cannot be expressed in terms of money will not be
recorded (Johansson, Stenkula and Du Rietz, 2015).
 ACCOUNTING PERIOD:
As the business is not incorporated to wind up and has a very long life, but the
accounts, revenues, profits and losses of the business are to be calculated and since it
would become difficult to calculate all these accounts after a very long time and it would
become more difficult to calculate the profits, losses, expenses and other accounts of
the business in 20 years or 30 years or more, hence the business is divided into small
intervals or small sections, to calculate the profits and losses of the business. This
accounting period is for one year many businesses follow the calendar year that is from
January to December and some business follows the accounting year that is from April
to March (Howard, Gordon and Jones, 2014). Thus it becomes easier for the
organization to calculate different accounts and prepare those accounts in the
accounting period like profit and loss statement, cash flow statement and other financial
records. For example, If Mirvac Company incurs income of $2200 during the first

quarter of the year. The income will be received in next quarter. The accounting period
concept requires Mirvac Company to disclose these income on the P&L account for the
first quarter of the year.
 DOUBLE ENTRY SYSTEM:
This principle states that each deal has a dual aspect. Each transaction which is done
and recorded in the financial books affects at least two accounts. Two accounts are
impacted by any transaction that is every transaction has a credit and a debit. If one
account is debited then another account must be credited. Each transaction has a
double entry. Since every transaction has a dual aspect it is known as double entry
system. The balance of all the financial books is equal because of the double entry
bookkeeping system which is on the following basis:
Asset = liability + capital
For example, Jack incorporated business with thirty hundred thousand equity and took a
loan of five hundred thousand, this cash is used for the purchase of assets:
Assets= thirty-five hundred thousand
Capital= thirty hundred thousand
Liability= five hundred thousand
35 = 5 +30
Debit = credit
(Double-entry system)
 CONSERVATISM/ PRUDENCE:
According to this concept, the business needs to record all the known future losses of
business and all the future profits should be ignored. This principle says that while
preparing the financial records, the policy of playing safe should be applied and used
that is prudence (Filatova, 2014). For example, doubtful debts are taken under
consideration and provision for doubtful debt is created, the stock at the time of bending

accounting year is always recorded at a lesser price that is either the market value or
the cost price of the stock.
IMPACTS AND EFFECTS OF CONSERVATISM:
If the concept of conservatism is not applied carefully and not used carefully, then the
profit from the financial books will be shown lower comparing to the actual profit and the
financial statement of the organization will show under an overstatement of liabilities
and assets accordingly, which is known as window dressing.
 FULL DISCLOSURE:
It is necessary for the organization to disclose(that is to show) all the essential
information related to business in front of the owner, investor, creditor and who so ever
required. Hence essential information which is of material interest or related to an
important thing in the organization needs to be disclosed in front of the requisite
(Devereux and de la Feria, 2014). the provisions are made by the law in case of
disclosure of any essential information of the firm. The framework for the preparation of
financial accounts is given by them in the prescribed act. some items which are not
materialistic or are not recorded in the accounting statement are shown under the
balance sheet as footnotes:
 Contingent liability
Case pending in court
Guarantee is undertaken
 The market value of investment and asset should be given by the way of footnote.
 MATERIALITY:
The items and things which are not related or have the negligible priority are not
recorded in the financial books. The items which are not of material interest are not to
be included in the books of accounts. A thing which can be material for one business

can also be immaterial for another (Burman, et al., 2016). For example, a small water
bag can be material for a small workshop and immaterial for Mirvac group.
Mirvac group has consolidated accounting statements for its general purpose. It
has been prepared on the basis of Australian Standards and other regulations of the
Australian Accounting Standards Board and International Financial Reporting
Standards. Its financial statements are prepared on the basis of going concern concept
and historic cost conventions except for following:
 Investment properties and properties which are under construction.
 Assets that are held for sale are measured at less carrying value and selling cost.
Revenues are measured on fair value and it identifies income when it has been
constantly measured and payment is possible. Expenses are recognized on an accrual
basis which helps in identifying actual profit or loss (Basu, 2016). This assists the entity
in preparing more reliable and accurate books of accounts which helps the stakeholders
to understand the actual financial position of the company.
CONCEPTUAL FRAMEWORK AND ISSUES RELATED WITH MEASUREMENTS:
The measurement or computation of any transaction that is economic or financial on the
basis of money, time or any other unit is known as accounting measurement. The
activities of the firm give appropriate information to help in the calculation or
computation. The concepts for these measurements are given below:
 Objectivity: this concept says that the information and data collected from the
activities of an organization should be based on true facts and should be reliable
and certifiable.
 Consistency: The tool or any method once followed for preparation of financial
account should be used forever, for example; if written down value method is
used for charging depreciation on any asset then the same method will be
followed for a lifetime.

 Matching: The income or the profits of a year should always match to the
receipts of the organization, this is known as the concept of matching (Choi, Rho,
and Cho, 2015).
The Mirvac group takes a huge risk and prepares its accounts on the basis of fair
value measurement concept. The Mirvac group has taken a higher amount of risk as
the data required in this tool is very realistic and due to the changing environment of
the Australian economy, it is very difficult to evaluate the actual or fair price of
anything.
FUNDAMENTAL QUALITATIVE CHARACTERISTICS:
The features and elements which keep uniformity and quality in the data related to
monetary transactions of the business are known as fundamental qualitative
characteristics, which are briefly explained and discussed below:
RELEVANCE: the data ought to be relevant to the requirements of the users, that is
that the case within which the data influences the economic choices of users. This
would possibly involve coverage of specific relevant data or is also the data whose
statement might influence the Economic choices of the present users (Adejare, 2015).
Financial data is helpful only if it's supportive and prognostic price.
supportive price helps the controller to analyze and check previous evaluations and
assumptions. prognostic price assists users in assumptive futures outcomes of
monetary knowledge. Materiality is a very important part of this quality. It states that
something that's material for the associate organization might not be material to an
alternative party. data is taken into account as material once it's necessary enough to
work out the choice of its users. Nature and size of the business entity affect the
materiality of its knowledge.
FAITHFUL REPRESENTATION: It is an important ought to be thought-about whereas
preparing financial statements. This includes the correct reflection of the actual position
of the company's business (Wu, Ramesh and Howlett, 2015). The trustworthy
illustration ought to be followed altogether the steps of accounting and in every a region
of financial statements. There unit three attributes that have to be followed for

representing books of accounts faithfully. This unit is given below:
• All data given in financial statements ought to be complete. It has to be compelled to
show a clear image of cash flows and financial position of the entity.
• There mustn't be any error in financial statements. Fraud and falsehood ought to be
avoided.
• Books of accounts ought to show unbiased data concerning the business. It has to be
compelled to represent the real position of the company (Schulze, et al., 2016).
CONCLUSION:
It is hereby concluded that the accounting principles and concepts are very crucial for
preparing the financial records and books of any organization or firm. Accounting
concepts play a very vital role in accounting management. The project concludes that
the Mirvac group took a very huge risk by applying the fair value measurement concept
but if this concept is very crucially assessed and followed by the company, the real
value of assets will be disclosed by the organization and secondly the profit will also be
accurate. The assignment above has briefly described the learning from the
fundamental qualitative characteristics of accounting principles and the conceptual
framework and issues relating to that framework.

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