Why it is important to have accounting concepts and principles?
Image Source - https://flic.kr/p/fLzJkE
The Importance of Accounting Concepts and principles
- Category :Accounting
This article speaks about the concepts and principles of accounting. It also discusses as to how they are important in accounting field.
Accounting system is based on some concepts and conventions. Accountants all over the world would agree on certain basic points on which accounting theory and practice is based being commonly referred to as accounting concepts and principles. They are considered as a broad set of conventions that are meant to provide basic frame work for financial reporting. The importance of these concepts and principles lies in the fact that they are related to the entire Financial accounting process while they affect directly the way the financial reports are prepared. Accountants need to apply professional judgments while preparing financial reports, these concepts and principles help them to ensure that they are not being misled and that providing a true and fair view of financial statements is being accomplished.
Following is a list of the major accounting concepts and Principles:
- Timeliness
- Faithful Representation
- Reliability
- Neutrality
- Matching Concept
- Prudence
- Completeness
- Entity Concept
- Money Measurement Concept
- Understandability
- Comparability
- Consistency
- Materiality
- Going Concern
- Accruals
- Substance Over Form
- Duality Concept
- Realization Concept
Understanding the accounting concepts and principles properly is necessary for anyone who is willing to make career or working in the accounting field. If these concepts and principles are followed in the professional work in a way as needed, accountants can save money, energy time and efforts, while a good grasp of these concepts and principles enable them to work effectively and efficiently.
Also, it’s worthwhile to note that the accounting concepts and principles is of great help and assistance to the professional accountants to consider and apply what is best in the interests of the users of financial information in case an accounting concept or principle leads to create conflict with that of another. In addition, after you acquire a good knowledge of accounting principles, most accounting topics will make more sense to help you perform the related activities in a more professional manner. Thus, the accounting concepts and principles are important for accountants, as they need to abide by them every time they involve in analyzing, recording, summarizing, reporting and interpreting financial transactions of a business.
Mention deserves to be made about GAAP – Generally Accept Accounting principles. It’s an international convention of good accounting principles. GAAP is based on the core following principles:
- Business Entity Concept
- Going Concern Concept
- Principle of Conservatism
- Objectivity principle
- Time period principle
- Revenue recognition principle
- Matching Principle
- Cost Principle
- Consistency Principle
- Materiality Principle
- Full Disclosure Principle
Related Articles
How To Reduce Costs On Payday Loans
A payday loan is a short term unsecured loan that individuals avail when they require cash urgently. This loan is also referred to as a cash advance, salary loan or payday advance.
Did Lack Of Business Ethics Contribute To The Current E
Public memory is awfully short, and one of the reasons why financial crisis tend to recur as soon as the horrifying memories of the last crisis have died down. As we complete a decade of what was one of the worst and most wide spread financial crisis of last century, perhaps it is time to remind ourselves of the man-made follies that led to it, and try to ensure that they are repeated in near future. .
How To Compete For International Trade
All trade involves exchange of goods, but trading across political boundaries of nation states, accompanied with the need to adjust to different regulations, regimes, currencies, culture and markets necessitates additional preparedness. To being with, it is important to be aware of the idiosyncrasies of sovereign markets where one wishes to trade, understand the risks posed therein and be prepared for it.