Q. Concepts of accounting?
- The major underlying assumptions or else concepts of accounting are (a) business entity (b) going concern (continuity) (c) money measurement (d) stable dollar (e) periodicity and (f) accrual basis and periodicity.
- Other fundamental accounting concepts that affect the accounting for entities are (a) general-purpose financial statements, (b) substance over form, (c) consistency, (d) double entry and (e) articulation.
- The major principles comprise revenue recognition exchange-price or matching, cost, gain and loss recognition and full disclosure. Major exceptions to the realization principle comprise cash collection as point of revenue recognition instalment basis of revenue recognition and the percentage-of-completion method of recognizing revenue on long-term construction projects.
- Modifying conventions include materiality, cost-benefit and conservatism.
- The FASB has defined the objectives of qualitative characteristics of accounting information, financial reporting and elements of financial statements.
- Financial reporting purposes are the broad overriding goals sought by accountants engaging in financial reporting.
- Qualitative characteristics are those that accounting information must possess to be useful in decision making. The two primary qualitative characteristics are reliability and relevance. One more qualitative characteristic is comparability.
- Pervasive constraints comprise cost-benefit analysis and materiality.
- The FASB has defined and identified the basic elements of financial statements.
- The FASB has as well described revenue recognition criteria and provided guidance as to the timing and nature of information to be included in financial statements.