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Description of Assessment Requirements 1 Description Students are required to fully describe 10 Key concepts of accounti - Assignment Example

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Ten Key Concepts of Accounting Subject: Professor: February 25, 2013 Ten Key Concepts of Accounting Introduction The Accounting concepts ensure better financial report communication. The research delves on International Accounting Standard no…
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Description of Assessment Requirements 1 Description Students are required to fully describe 10 Key concepts of accounti
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Description of Assessment Requirements 1 Description Students are required to fully describe 10 Key concepts of accounti

International Accounting Standards (IAS) no. 1 states that the concepts guide the how the contents of the financial accounting reports should be constructed. The conceptual framework of accounting includes the objectives concepts of financial reporting group. The second group of concept accounting concepts represents the qualitative characteristics of useful financial information. The third group of conceptual accounting framework concepts includes description, recognition and measurement concepts of the financial reports’ elements (Alexander, 2008). Discussion In terms of the first objective accounting concept, the financial reports are prepared in order to present the financial data pertaining to the business entities’ periodic transactions. Consequently, the financial statement preparers implement the going concern accounting concept. The concept indicates that business entity is assumed to continue its business operations for several years, without any telltale signs of bankruptcy creeping into the doors of the business entity. When bankruptcy issues crop up, the going concern concept no longer applies to the business entity. The going concern concept indicates the entity has no plans of folding up or liquidating the business operations within the foreseeable future (Kieso et al., 2011). Relevance Accounting Concept . In terms of the qualitative characteristics group of financial concepts, the financial report accounts should comply with the relevance concept of financial accounting (Kolitz, 2009). Relevance means that financial data reported is material to the decision making process. The relevant financial data can significantly influence the decision makers’ choices. To be relevant, the financial data should comply with the materiality principle of financial accounting. The financial information is material if the data can change the decision makers’ choices. For example, the manager gathers data on whether to promote the cashier to treasury department manager. Information indicating that the cashiers incurred several cash count shortages may prod the managers to reject the proposal to promote the cashier. Completeness Accounting Concept. Further, the financial reports must comply with the completeness concept of accounting. The completeness concept requires the companies to record all transactions in their respective accounting periods. The income statement must present all sales done within the accounting period. The same statement requires that all expenses should be recorded in the year they are used, not during the year when the expense amounts are paid. The company must include all business transactions in the preparation of the financial reports to avoid being charged for fraud or lackluster financial report preparation. Neutral Accounting Concept. Furthermore, the financial reports must implement the neutral concept to f accounting (Morris, 2009). The financial reports serve the needs of several users. The customers use the financial reports to determine if the company will continue to operate for several years. The financial report indicating the company generated a four your net loss amount will impress on the current and future customers that the company is on the verge of bankruptcy. Consequently, the company may be forced to close shop within the next few years of business operations. When this happens, the current and future customers are forced to seek other suppliers of their needs and wants. The customers need neutral financial reports for ... Read More
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