This website uses cookies to ensure you have the best experience. Learn more

Accounting Essay

1337 words - 6 pages

TIME INTERVAL CONCEPT
TIME INTERVAL CONCEPT, in accounting, requires that financial statements be prepared at regular intervals, e.g. monthly, quarterly, annually. Final accounts are prepared at the end of the accounting period ie one year. Internal accounts can be prepared monthly, quarterly or half yearly.

DUAL ASPECT CONCEPT
Dual aspect concept states that every transaction has two effects if there is any debit entry then there must be credit entry.
This state that there are two aspects of accounting, one represented by the assets of the business and the other by the claims against them. The concept states that these two aspect are always equal to each other. In other words, this is ...view middle of the document...

$600 is to be considered a withdrawal because only $300 (1/3rd) related to business and the other $600 was for domestic purpose.

Historical cost concept:
It states that fixed assets are always shown in balance sheet at cost price. It helps to show the true and fair value of the asset.
Accounting is concerned with past events and it requires consistency and comparability that is why it requires the accounting transactions to be recorded at their historical costs. This is called historical cost concept.
Historical cost is the value of a resource given up or a liability incurred to acquire an asset/service .
In subsequent periods when there is appreciation is value, the value is not recognized as an increase in assets value except where allowed or required by accounting standards.
Examples
1. 100 units of an item were purchased one month back for $10 per unit. The price today is $11 per unit. The inventory shall appear on balance sheet at $1,000 and not at $1,100.

Prudence Concept:
It states that expected loss is never to be understated, whereas, expected profit is never to be overstated. Future losses should be recorded immediately and expected profits should not be recorded unless they are realized.
Prudence is a key accounting principle which makes sure that assets and income are not overstated and liabilities and expenses are not understated.
Examples
1. Bad debts are probable in many businesses, so they create a special contra-account to accounts receivable called allowance for bad debts which brings the accounts receivable balance to the amount which is expected to be realized and hence prevents overstatement of assets. An expense called bad debts expense is also booked to stop net income from being overstated.

Going Concern:
It states that a business is not going to end in the foreseeable future and it has unlimited life.
Financial statements are prepared assuming that the company is a going concern which means that the company intends to continue its business and is able to do so.
The status of going concern is important because if the company is a going concern it has to follow the generally accepted accounting standards.
The auditors of the company determine whether the company is a going concern or not at the date of the financial statements.
Examples
1. An oil and gas firm operating in Nigeria is stopped by a Nigerian court from carrying out operations in Nigeria. The firm is not a going concern in Nigeria, because it has to shut down.

Consistency Concept:
The concept of consistency means that accounting methods once adopted must be applied consistently in future. Also same methods and techniques must be used for similar situations.
It implies that a business must refrain from changing its accounting policy unless on reasonable grounds. If for any valid reasons the accounting policy is changed, a business must disclose the nature of change, the reasons for the change and its effects on the items...

Other Papers Like Accounting

Accounting Essay

548 words - 3 pages Accounting Practices Name: XXXXXXXX oooo Accounting I-ACC100 Professor XXXXXXXXX Date: XXXXXXXXX Accounting Practices The year is 2011, and this country has been nearly crippled financially with the corporate accounting scandals. One of the most famous is the scandal of Enron, Waste Management, WorldCom, Qwest Communications, Health South Corporation, and then the infamous Bernard L. Madoff Investment scandal. The Medoff Ponzi

Accounting Essay

314 words - 2 pages After secondary school, I need to decide what course to choose in order to further my study. Two of my cousins who are chartered accountant explained to me about accounting. From the explanation and sharing, I have interest in the course and I understand that accountancy is a profession. By having an ACCA accreditation, I can also have other career opportunities such as auditor, manager, tax agent and so on besides account. I believe I can have

Accounting

1152 words - 5 pages Topic: Discuss the impact of technology on the accounting profession in relation to the point that “Accounting is moving to information management” considering whether the impact has increased, whether greater changes in technology have taken place which has impacted the point raised since 1999, and what are the expected future effects of technology. One of the impacts that the technology had on the Accounting profession was related to

Accounting - 557 words

557 words - 3 pages Question 1 Revenue: * The total money collected by the business for the sales of goods or services provided during the accounting period for that particular year. * Including net sales or exchange of assets or anything that will increase the owner’s equity before any expenses are being subtracted. Service revenue: * Reports the fees that are earned by the company during the accounting period in the income statement. * It’s

Accounting - 624 words

624 words - 3 pages Sole proprietorship - a business owned by one person; most common form of business organization . Partnership - voluntary association of two or more persons for the purpose of conducting a business. Corporation - legal entity created under laws of a state or federal government Accounting - process of measuring economic activity of an entity in monetary terms and communicating the results to users GAAP - set of standards and procedures that

Accounting - 584 words

584 words - 3 pages Understanding management accounting techniques in the context of organizational change: as strategic business partners with a responsibility to improve operations, management accountants must identify techniques that support incremental change and h elp transform their firm. EXECUTIVE SUMMARY Driven by the need for organizational change, management accounting techniques have developed and proliferated at an unprecedented rate in the last few

Accounting - 1259 words

1259 words - 6 pages Unit 4 Assignment 1 1. Accrual Basis Accounting: Under the accrual basis accounting, business transactions specifically those relating to income and expenses are recognized and recorded in the books the moment the substance of the transaction has been perfected. Generally Accepted Accounting Principles (GAAP) prefers that financial statements are based entirely on the accrual basis accounting instead of the cash basis accounting. In its

Accounting - 3380 words

3380 words - 14 pages An Analysis of Accounting Ethics Anna Aspras ACC 770 Proposal Hunter College INTRODUCTION Ethics refers to the discipline that deals with the bad and the good and also with the moral duties as well as moral obligations (Stolowy and Breton 2004). As Weidmann and Lenzen (2006) points out, ethics entails doing the right thing. Accounting ethics is mainly in the area of applied ethics and at the same time, it is also a part of business ethics as

Accounting - 5996 words

5996 words - 24 pages CHAPTER 1 ACCOUNTING: INFORMATION FOR DECISION MAKING OVERVIEW OF BRIEF EXERCISES, EXERCISES, AND CRITICAL THINKING CASES Brief Exercises B. Ex. 1.1 B. Ex. 1.2 B. Ex. 1.3 B. Ex. 1.4 B. Ex. 1.5 B. Ex. 1.6 B. Ex. 1.7 B. Ex. 1.8 B. Ex. 1.9 B. Ex. 1.10 Learning Objectives 1, 3, 5 2, 5 3, 4 5, 6 1, 3, 5, 6 5, 6 2, 5, 6 7, 8 5, 7 1 Topic Users of accounting information Components of internal control Inexact or approximate measures Standards for

Accounting - 1776 words

1776 words - 8 pages | | |Principles of Accounting II | Copyright © 2011 by University of Phoenix. All rights reserved. Course Description This course introduces accounting concepts in a business environment. Students learn to create and apply accounting documents in making better business decisions. Other topics include plant assets

Accounting - 838 words

838 words - 4 pages Class: Here are some excerpts from the model solution to UpBeat that discuss four possible alternative solutions to the issues raised in this case. Discussion 1 For each of the transfer provisions included in the agreement, determine whether the provision would preclude sales accounting. Alternative 1 — Fail sale accounting criteria because of Transfer Provision 1. ASC 860-10-40-5(b) requires that the bank have the right to

Related Essays

Accounting Essay 1031 Words

1031 words - 5 pages Question 1:  * Proficient-level:  * There are several important functions performed in an organization, among which accounting is one of them. Define the accounting function and discuss how it differs from double-entry bookkeeping. Answer: According to the Dictionary of Accounting Terms, Accounting is defined as a one step process of recording, measuring, interpreting and communicating financial data by preparing financial

Accounting Essay 1693 Words

1693 words - 7 pages Intermediate accounting 1 paper Kari Andrew 11/15/13 There are many different accounting specialties cost accounting, managerial accounting, financial governmental accounting, tax accounting, and many more. Right now I am currently an accounting major as well as business marketing major. Accounting was never my first choice; however when I had taken it in high school I found a small interest in it. Math was always my strongest subject in

Accounting Essay 1281 Words

1281 words - 6 pages Cash vs. accrual: Is there a difference in recognizing transactions? ACC205: Principles of Accounting I Professor Student Name Date Cash vs. accrual: Is there a difference in recognizing transactions? Cash and accrual based accounting are two ways use to record revenue or expense transactions. However, there is a difference in recognizing cash and accrual accounting

Accounting Essay 1214 Words

1214 words - 5 pages Accounting Principles By: Mae Sejour American InterContinental University Unit 1 IP ACCT205-1204B-06 October 7, 2012 Abstract This paper will be giving in details the main objectives of accounting, the basic terminology of accounting process, the job responsibilities of an accountant to individuals and businesses, the part technology play in a business and how accounting can affect my personal life; stressing accounting role in