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Accounting Concepts For Financial Reporting

Financial ReportingFinancial Reporting

There are a few aspects of accounting concepts. These are conditions, assumptions and postulates. A business is considered as a separate entity. All transactions are recorded, and every transaction has a double effect. In this dual aspect accounting concept, there is a credit transaction as well as a debit transaction.

Only dealings that can be measured in money are taken into account and recorded in account books. No matter what the market price or realizable value of an asset is at the time of purchase or sale, the actual buying or selling price is recorded. When the cost of a finished product is determined, the labor costs and overhead expenses like power, rent and transport are taken into account.

After a specific interval of time, the income statement and the balance statement are looked into to see the financial position of the business. This is known as the accounting period. If the income over a specific period exceeds the various expenses incurred during that period, then the business has made a profit.

The realization concept is one of the accounting concepts where certain incomes like rent, interest, etc. are entered into account books even though they will be realized in cash at a future date. All the transactions that are entered into account books have to be supported by verifiable documents like passbooks, bills, invoices, correspondence, etc.

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