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Explaning Accounting Concepts And Business Structure

722 words - 3 pages

Explaining Basic Accounting Concepts and Business Structures
ACC/537
Dec, 5, 2011

Explaining Basic Accounting Concepts and Business Structures
The purpose of the paper is to explain basic accounting concepts and business structures. This paper covers four topics, which include the following:
1. Identify and describe the sources of generally accepted accounting principles (GAAP).
2. Describe effective accounting information using the qualities of accounting information.
3. Describe how an accrual-based accounting system is different from a cash-based of accounting
4. Describe the types of business structures and the defining features of each structure.
The Sources of ...view middle of the document...

, 2007, p. 31). The qualities include user-specific qualities, primary qualities and secondary qualities.
User-specific quality is the understandability of information if it can help users see its significance. Primary qualities are relevance and reliability of the information. “To be relevant, accounting information must be capable of making a difference in a decision” (Kieso et al., 2007, p. 33). It should have predictive value, feedback value and timeliness. Reliability refers “to the extent that it is verifiable, is a faithful representation, and is reasonably free of error and bias” (Kieso et al., 2007, p. 33). Secondary qualities are comparability and consistency. Comparability of the information is to record it in similar way for different companies, so it informs similarities and differences of economic events. Consistency means to use the same accounting treatment for similar events over time. These qualities provide effective accounting information.
Accrual-Based Accounting V.S. Cash-Based Accounting
Accrual-based accounting records financial events when it occurs and not when the cash is received or paid. On the other hand, cash-based accounting records revenue when cased is received and expense when cash is paid. Because cash-based accounting violates the revenue...

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