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Introduction to Accounting - AAS1 - Essay Example
Finance & Accounting
Pages 4 (1004 words)
Introduction to Accounting Introduction to Accounting Accruals Accrual basis is one of the fundamental concepts of accounting. Accrual basis of accounting means that the revenues are recorded when the sales are made or the services are rendered…
There is a significant relationship exist between revenue and expense. The company incurs expenses to generate revenue so, the matching principle states that all the expenses that were incurred in a period to generate revenue should be subtracted from the revenue of the same period for the purpose of computation of the net income (Nikolai, et al., 2010). Going Concern Concept Going concern is also a key concept accounting that assumes that the company will continue its operation for a foreseeable future. This important assumption is made because the amount of time, the company will continue its business cannot be predicted (Carl, 2011). IAS 1 states that if the company has serious threats to going concern they must be adequately disclosed in the financial statements and if the management concludes that the entity is not going concern the financial statements should not be prepared on going concern assumption. Business Rates In the previous year the company paid total amount of ?9,600 on account of business rates, in the two equal installments of ?4,800 each. Now if the rates for the bills are higher by 5% in the current year, the total amount of the bill will be ?10,080 (9,600*1.05) making it ?5,040 each installment. First installment has already been paid and the second installment is due in December 2012. ...
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