Accounting for Business: Key Concepts & Qualitative Financial Reports

This report provides a detailed explanation of essential accounting concepts necessary for creating accurate and consistent financial reports, emphasizing their role in business operations. It covers key concepts such as the dual aspect concept, realization concept, accrual concept, matching concept, and economic entity concept, illustrating each with practical examples. Furthermore, the report discusses the qualitative features that enhance the usefulness of financial reports, including relevance, understandability, verifiability, faithful representation, timeliness, and comparability. These features are crucial for stakeholders to make informed decisions about a company's financial performance. The report concludes by highlighting the significance of accounting in maintaining transparency and facilitating effective business management. Desklib provides access to this document along with a wealth of other solved assignments and study tools to aid students in their learning journey.

ACCOUNTING FOR
BUSINESS

TABLE OF CONTENT
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Accounting concept required for financial report making...........................................................3
Qualitative features of financial report for making it useful information to users......................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Accounting for business gives an organized recording and presentation of company's
financial information. Accounting is considered as a language of business as it manages all
business resources (Birt and et.al 2020). Accounting gives the track of economic state of
organization. This chapter consists of accounting concept to make financial report with
illustrative examples it further discuss the qualitative characteristics of financial report.
MAIN BODY
Accounting concept required for financial report making
Main objective of accounting concept is to maintain consistency in accounting records.
For this purpose many accounting concepts are introduced in making of financial report of any
organization.
Dual aspect concept:
Dual aspect strategy is basic root of accounting. It gives the basic recording of business
activities for accounting records. It gives the concept of dual transaction effect for every
transaction there is a dual effect therefore this recording of transaction stored in two different
places. This aspect helps to find the dual concept of transaction through which recording of its
process can be applied for accounting.
For an example if consumer purchase something then the vendor who receives cash has different
aspect and the thing which is purchased by consumer have different aspect.
Realization concept:
This concept states that the profit earned by the company included in accounting record
when it is completely realized. The term realization means that any legal upright of cash. It
includes trading of goods. This concept gives the exact information of cash flow (Hanley, 2020).
For an example consumer good company received an order of €50,000 by the end of the year
and they delivered €30,000 and rest they delivered in next year so revenues and cash is only
realised when the whole delivery is made to the customer.

Accrual concept:
Accrual concept describes that payment is not fully made or due in amount that has yet to
be paid at the final stage of accounting. It explains that the recording of transaction is only made
when there is certainty of their occurrence it does not affect with the uncertainty of cash
received. In accounting records accrual concept predict that the cash is only made when there is a
process of selling of goods.
For an example a company sells their good worth €50,000 in the month of January for that they
didn't receive full payment until February the payment is due and it has to be paid in January
therefore accrual concept is used to examine that revenue is only recognized when there is
complete realization of cash flow.
Matching concept:
Matching concept allows you to record both transaction at the same time. It explains that
once the revenue is made the next step is to allocate it to the accounting record. This concept can
be done with the help of accrual concept.
For an example if consumer pays a complimentary amount to the salesperson in certain period
then this complimentary amount should also be recorded in that time.
Economic entity concept:
Economic entity concept is one of the most important concept for any business. It
describes that the business transaction activities should be kept as separated with the owner's
personal transaction activity. There must be separate accounting records for both business and
owner's transactional activity (Kimmel, Weygandt and Kieso, 2018). Therefore, this concept
allows reflecting the transaction on their perspective areas as business financial transaction is
only reflect on business expenses not on owner's expenses.
For an example if owner has to pay their bills then this transaction is made by their personal
account not from company's account or business transaction is only reflected from company's
account not from owner's side.

Qualitative features of financial report for making it useful information to users
Qualitative characteristics provide helps to the stakeholder for developing informative
financial report. These qualitative characteristics give the information of financial statement to
stakeholders or accounting user to understand the financial performance of their company. There
are some qualitative features that helps stakeholders to make useful financial report are:
Relevance feature:
Relevance feature describes that how relevant the information is to make useful financial
report. Accounting information must delivers to stakeholder in relevance form so that it is easier
for the accounting user to analyse or predict the future events. For the relevant information past
event data is given to stakeholder through which they can make sustainable financial report.
Understandability feature:
This feature describes that the information must consist of relevant and logical data or in
understandable form so that it can be easily accessed by the stakeholder in making of company's
financial report otherwise it will cost company's image and affect their revenues.
Verifiability feature:
Information given for the accounting records must be verified in its order to avoid any
kind of miserable situation in company's financial statement. If company made an investment,
and they told their accountant to record this transaction if they are not able to consider it then the
information consider as not verifiable.
Faithful representation feature:
Faithful representation also known as reliability feature, it describes that information
must be reliable in its nature when processing it for accounting records. This feature includes
clear and complete process of information means it should be consist of all company's financial
transaction so that stakeholder can determine the financial state of company based on this
financial report can be made (Kraft, Vashishtha and Venkatachalam, 2018).
Timeliness feature:

Timeliness feature describes that how rapidly information is available for the accounting
process. All the information must be available to the user in a relevant time duration so that
quick financial report can be made.
Comparability feature:
Comparability feature track the company's financial performance. The information given
to the stake holder must be comparable to their company's prior financial statement. This feature
helps the stakeholder to make good decision based on comparable information. These are the
features which helps accounting user or stakeholder to make useful financial report (PANDYA,
2017).
CONCLUSION
Through the above concept it is summarized that the role of accounting played an
important role to run the business of any organization. To used accounting concept company can
achieved consistency in their financial records. This chapter provides a useful financial report
concepts to the accounting user or stakeholder to understand their company's financial record.

REFERENCES
Books and Journals
Birt, J. and et.al 2020. Accounting: Business reporting for decision making. John Wiley & Sons.
Hanley, S., 2020. Accounting principles. Construction Journal, pp.31-31.
Kimmel, P.D., Weygandt, J.J. and Kieso, D.E., 2018. Financial accounting: Tools for business
decision making. John Wiley & Sons.
Kraft, A.G., Vashishtha, R. and Venkatachalam, M., 2018. Frequent financial reporting and
managerial myopia. The Accounting Review. 93(2). pp.249-275.
PANDYA, A.R., 2017. Accounting concepts.