LSC UoS - Accounting for Business: Concepts & Characteristics

This report provides an overview of accounting concepts used in the preparation of financial statements and discusses the qualitative characteristics that make financial reports useful to users. It covers key accounting concepts such as the money measurement concept, going concern concept, business entity concept, dual aspect concept, and stable monetary unit concept. Additionally, it explores the qualitative characteristics of financial reports, including relevance, faithful representation, comparability, understandability, and timeliness. The report concludes that accounting is crucial for maintaining and compiling financial documents for a business, contributing to administration, accounting, and taxation.

Accounting for Business

Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
(a) Discuss five accounting concepts used in the preparation of financial statements............................3
(b) Discuss the qualitative characteristics of financial reports that make information useful to users. . .4
CONCLUSION...............................................................................................................................................5
REFERENCES................................................................................................................................................6

INTRODUCTION
Accounting is essential to operating a company since it allows managing account
balances, maintaining objectives are met, and offer quantifiable financial resources to the firm,
management, and the authorities that could be used to make business choices. The methodical
collection, analysis, interpretation, and presentation of monetary data are known as accounting
management. Accounting can be handled by a single individual in a small company or by
multiple players in huge corporations (Agana, 2021). Accounting is the method by which a
company maintains track of its activities. In this report consist of accounting concepts used in
preparation of financial statements and qualitative characteristics of financial information.
MAIN BODY
(a) Discuss five accounting concepts used in the preparation of financial statements
Accounting ideas and standards are the norms and concepts that all accountants follow
when documenting market movements and preparing financial accounts. Overpayments,
comparability, prudence, going concern, and consistency are some of the basic accounting
concepts that will be discussed.
Money measurement concept: Just those elements that can be stated in monetary terms are
usually dealt with in bookkeeping. Currency has the virtue of being a good unifying theme for
expressing the broad range of assets held by a company. Nevertheless, not all of these resources
can be assessed in money units, thus they will be left off of a balance sheet. As a result, the
breadth of financial accounts is limited by the accounting elements notion.
Going concern concept: The going concern notion states that a company will keep operating in
the coming years. To put it another way, there is no desire or necessity to liquidate the company's
assets. Unless a company is in financial trouble and required to show its lenders, a sale like this
may be necessary. This rule is significant because the worth of fixed assets on sale is frequently
low in comparison to their calculated value, and the prospect of mortgaging the facilities would
necessitate fully recording any anticipated losses on selling (Abdullah, 2020).

Business entity concept: The Company and its holder(s) are recognized as distinctly different
entities for taxation purposes. That's why large corporations are considered as claimants from
their own company for the interest of the stakeholders. The legal situation that may arise between
firms and their proprietors must be differentiated in the commercial business notion. The
regulation does not distinguish between it firm and its operator in the case of limited liability
companies (s). From the other extreme, limited businesses have a valid regulatory difference
between the firm and its shareholders.
Dual aspect concept: Every operation has two components that have an effect on the value
sheet. As a result, buying a car for currency results in higher in one asset (the automobile) and a
drop in the other (the money) (cash). When you return a loan, you reduce your obligation (loan)
and increase your asset (cash/bank) (Ali and Anwar, 2021).
Stable monetary unit concept: Cash, which is the form of time in accountancy, will not vary in
value over the years, according to the stable monetary unit idea or consistent concept. For
organizations, the principle of regularity is equally critical. The consistency idea states that
similar items should be treated consistently within each income statement and from another term
to another. Depreciation, for instance, should be estimated consistently throughout each fiscal
year, and the purchase of specific machines and techniques should be classified as marketable
securities in later decades.
(b) Discuss the qualitative characteristics of financial reports that make information useful to
users
The traits that made accounting reporting interesting to consumers are known as
qualitative characteristics. Qualitative qualities can be divided into Fundamental and Augmented
good qualities for analytic reasons.
 Relevance: One of the two key criteria that make accounting data valuable for decision-
making is applicability. Accounting data must be important in contributing in a decision
to be relevant. Irrelevant information and other information that has no influence on a
choice. Whenever financial data has forecast, confirmation, or both significance, it has
the potential to revolutionize the way.

 Fairly representation: The second key attribute that makes accounting information
valuable for decision-making is true measure. The terms "faithful representation" and
"accurate representation" refer to how closely the figures and explanations correspond to
what actually occurred or happened. Although most consumers find the necessary or skill
to assess the data's true substance, accurate depiction is required.
 Comparability: Comparability is a quality trait that allows consumers to recognise and
comprehend similarities and contrasts between objects. Knowledge about a going
concern is more relevant if it can be compared to traditional data from other
organizations, as well as data from another organization for a particular age or date
(Saragih Soraya and Hendrawan, 2021).
 Understandability: The financial statements are made public in order to tackle the
stockholders. As a result, it is critical that such declarations be presented in a form that is
simple for stakeholders to comprehend and comprehend. These assertions must contain
information that is both legitimate. At the sake of clarity, management must take into
account not just mandatory information, but it also extent of voluntary releases that
would enhance balance sheets more understandable. Whenever required, the governors
must expand on the data held in the disclosures.
 Timeliness: All income statement information should be provided in a timely manner.
The announcements must not be unnecessarily late or postponed, so that consumers of
certain materials have all necessary and ahead information in order to make their
financial judgments. Whereas this trait requires more efforts, it is nonetheless important
because postponed knowledge renders any appropriate actions ineffective (Matsuoka,
2020).
CONCLUSION
As per the above report it has been concluded that Accounting is the practice of
maintaining and compiling financial documents for a business. It's a wide key factor contributing
to anything from administration to accounting to taxation. There really are various different types
of financial accounting. The income statement system is very efficient and entails registering a
trade as soon as it occurs. Other possibilities for corporations include accrued and mixed

techniques. A company can undertake some accrual accounting itself while entrusting the
majority of the job to another auditor.

REFERENCES
Books and Journal
Agana, J. A., 2021. Essays on the Implications of Accounting and Audit Regulations.
Abdullah, N. H. N., 2020. Assessing strategic management accounting practices in public
interest companies in Malaysia. Indonesian Journal of Economics, Social, and
Humanities. 2(1). pp.13-25.
Ali, B. J. and Anwar, G., 2021. Business strategy: The influence of Strategic Competitiveness on
competitive advantage. International Journal of Electrical, Electronics and
Computers. 6(2).
Saragih, A. H., Soraya, A. and Hendrawan, A., 2021. A Decade of XBRL Research in
Accounting in Indonesia: A Literature Study. The Indonesian Journal of Accounting
Research. 24(2).
Matsuoka, K., 2020. Exploring the interface between management accounting and marketing: a
literature review of customer accounting. Journal of Management Control. 31(3). pp.157-
208.