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The Importance of Accounting Concepts

   

Added on  2020-01-28

7 Pages1712 Words40 Views
Finance
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INCOME STATEMENT ANDBALANCE SHEET + CONCEPTS OFACCOUNTING
The Importance of Accounting Concepts_1

Table of ContentsINTRODUCTION...........................................................................................................................3Elements of Income statements...................................................................................................3Elements of Balance sheet...........................................................................................................4Materiality....................................................................................................................................4Duality aspect concept.................................................................................................................5Going Concern.............................................................................................................................5Money measurement....................................................................................................................6Business entity concept................................................................................................................6CONCLUSION................................................................................................................................6REFERENCES................................................................................................................................72
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INTRODUCTIONRole of business has increases by enclosing various transactions in the books of accountsof the business. The accounting concepts helped an entity in recording the reliable information asin books of the enterprise. This report will stress on different financial statements such as incomeand balance sheet of the business entity.Elements of Income statementsThere are two major elements of the income statements of an entity which helps indetermining the current profitability of the business concern which is given as below:RevenueThis is classified into three different categories which is given as follows:Revenue from operating source- It includes all this revenue generated by an entity fromdifferent sources in which an entity currently operating (Hoyle, Schaefer and Doupnik, 2015).For example sales from retailers, distributors and agents, wholesalers, manufacturers.Sales from secondary activities- The business earn money other than buying and selling ofgoods. For instance: Commission, using idle cash as investments, giving vacant premises onrent.Gains- The uncertain gain will be incurred in the business will be generated by an entity fromlong term assets hold by an entity for long term (Radebaugh, 2014). The revenues generatedfrom litigation on business, selling of old and obsolete machines, selling of land in the businessfor long time in an enterprise. For example: Investments, selling of personal assetsExpenses This is further divided into various categories which is as follows:Normal expenditure- It will involve all kinds of operating expenses incurred in order to fundthe normal business functioning (Feng and Li, 2014). For instance, Cost of sales, commissionexpenses.Non-operating expenses- the expenses incurred for funding the business requirements throughfinance. For instance, Interest paid to the bank for taking loan.Losses- The loss incurred in selling of plant which reduces the profit of the business entity.3
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