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Fundamental Accounting Concepts: Preparing Financial Statements

View Solution # 27239

Price: $6.00

1. Explain using various examples, how the fundamental accounting concepts are used in preparing financial statements.

Solution

Accounting is the language used by businesses to communicate their financial information and performance to interested parties. Like every language accounting too has a set of concepts that it is based on. Accounting has a set of twelve fundamental concepts that form the basis of all accounting; these concepts are called the General Accepted Accounting Principles (GAAP). These concepts explain the meaning of all the figures that are found in the financial statements of a company.

The paper analyses the usefulness of the fundamental accounting concepts in preparing the financial statements. The key concets of finance are briefly explained:
1. Entity
2. Money Measurement
3. Going Concern
4. Cost
5. Dual Aspect
6. Objectivity
7. Time Period
8. Conservatism
9. Realization
10. Matching
11. Consistency
12. Materiality

In light of these concepts, the three key financial statements namely Balance Sheet, Profit and Loss and Cash Flow statements are analysed.

No. of Words: 721 words Help

References: 5 Help

Price: $6.00

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