Six Accounting Concepts Used in the Preparation of Financial Statements

International
Accounting Standards
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Contents
Contents...........................................................................................................................................2
Discuss six accounting concepts used in the preparation of financial statements. Use examples to
illustrate the application of these accounting concepts....................................................................1
REFERENCES................................................................................................................................4

Discuss six accounting concepts used in the preparation of financial
statements. Use examples to illustrate the application of these accounting
concepts.
Some fundamental accounting principles are as follows:
Going concern- It means that the firm represented by the financial statements will continue
to work in the future. The financial accounts and cash budget are prepared with the hypothesis
that the firm would not be significantly decreased in size or dissolved, and also that the
corporation would continue to operate in the large picture sans becoming overly concerned
regarding the unpredictable situation (Emiaso and Egbunike, 2018). A large, purpose-built
building, for example, has great value to a going concern business; but, if the manufacturing had
to be dissolved, it might likely possess minimal use for various adjacent industries, leading to a
lower trade value.
Although individual rights (controlling interests in statute) pass between sellers and
consumers, business operations are recorded in financial accounts. This could or could not
happen at the same time as transactions. Credit transactions, for example, are recorded once the
transaction is concluded (and the ownership rights is transferred to the buyer), but the cash is not
received until later. Likewise, once goods for selling or exchanges are supplied, they are
invoiced to the customer, but these are reimbursed or recovered subsequently.
Realisation- Although individual rights (controlling interests in statute) pass between sellers
and consumers, business operations are recorded in financial accounts. This could or could not
happen at the same time as transactions. Credit transactions, for example, are recorded once the
transaction is concluded (and the ownership rights is transferred to the buyer), but the cash is not
received until later. Likewise, once goods for selling or exchanges are supplied, they are
invoiced to the customer, but these are reimbursed or recovered subsequently (Glushchenko,
Yarkova and Kucherova, 2017).
Business entity- Accountancy records, documents, and monitoring on a firm's management
are referred to as a corporate entity. They do not include the assets and liabilities of persons
engaged in the firm's management or functioning. For example, a single owner's monetary assets
and liabilities are kept separate from those of the company, and personal expenses (including a