The transaction involves two aspects, i.e. Give and Take. Business transactions are exchanges of economic consideration between parties and have two-fold effects that are recorded in at least two accounts. Business transactions are usually evidenced by an appropriate document such …
Accounting standards are written statements of uniform accounting rules and guidelines in practice for preparing the uniform and consistent financial statements. These standards cannot override the provisions of applicable laws, customs, usages, and business environment in the country.
The two broad approaches of accounting are cash basis and accrual basis. Under a cash basis, transactions are recorded only when cash is received or paid. Whereas under accrual basis, revenues or costs are recognized when they occur rather than …
There are two systems of recording business transactions, viz. double-entry system and single entry system. Under a double-entry system, every transaction has two-fold effects where a single entry system is known as incomplete records.
According to this concept, accounting transactions should be recorded in the manner so that it is free from the bias of accountants and others.
This concept states that accounting should focus on material facts. If the item is likely to influence the decision of a reasonably prudent investor or creditor, it should be regarded as material, and shown in the financial statements.
This concept requires that business transactions should be recorded in such a manner that profits are not overstated. All anticipated losses should be accounted for but all unrealized gains should be ignored.
This concept states that accounting policies and practices followed by enterprises should be uniform and consistent one the period of time so that results are composable. Comparability results when the same accounting principles are consistently being applied by different enterprises …
This concept requires that all material and relevant facts concerning the financial performance of an enterprise must be fully and completely disclosed in the financial statements and their accompanying footnotes.
The concept of matching emphasizes that expenses incurred in an accounting period should be matched with revenues during that period. It follows from this that the revenue and expenses incurred to earn this revenue must belong to the same accounting …