Accounting for Business

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Fundamental rules, assumptions, as well as principles of accounting provide the foundation
for documenting transactions as well as compiling financial statements. Summary-level
financial reports describing an organization's financial outcomes, financial status, including
cash flows are referred to as financial reports. An income statement, a balance sheet, as well
as a cash flow statement are all examples of financial statements.
The balance sheet is among the financial reporting tools. Assets and liabilities as well as
equity held by shareholders are included in this report. The entire assets must equal the total
liabilities and equity in this statement (BARBER, 2019). The income statement is a second
financial statement. For the period ending, it illustrates the outcomes of the company's
performance and financial activities. The cash flow statement is the last financial statement to
be prepared. It depicts how a company's cash flow has changed throughout the course of the
reporting period. Supplementary remarks should be included when financial statements are
presented to external parties. Accounting frameworks, including such GAAP or IFRS, require
the inclusion of numerous notes, including explanations of specific actions and
supplementary information on certain accounts.
The accounting concept serves as a fundamental assumption as well as rules and principles
that underlie the recording of company transactions as well as the preparation of financial
statements (Devid, 2018). The fundamental goal is to keep accounting records consistent as
well as uniform. Accounting is based on these fundamental principles. As a result of years of
practise, all of these notions have become widely recognised standards. Listed below are the
different topics covered in the essay's accounting section:
When it comes to financial reporting, this Business entity concept believes that the corporate
firm as well as its owners are two distinct entities. As a result, the owner's individual and
business interactions remain distinct. Investments made by owners are reflected in the books
as a debt owed to them by their companies. The owner's personal use of company funds and
property is not deductible as a business cost. As a result, the financial accounts are prepared
from the perspective of the business unit rather than the individual who owns the firm. The
foundation of accounting is based on this principle (Fukui, 2018).  To illustrate, an example
can be given. It is conceivable that Mr. Sahoo began his business by investing £100,000. He
spent £40000 on products, £20000 furniture, as well as £30000 on machinery as well as plant
and equipment. £100,000 is still in his wallet. These are the company's assets, not those of its
owner. As a result of the business entity idea £100,000 is an obligation of the business to the
owner of the firm, i.e. a capital expenditure.

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Money transactions are assumed to be the only way to conduct business in Money
Measurement concept. Pound is used in such transactions in our nation. As a result,
transactions that may be described in monetary terms are recorded in the accounting records
according to the money measuring concept. There are several examples where money is
involved, such as the selling of items for £ 200,000, the buying of raw materials for
£100,000, as well as the payment of rent for £100,000. When it comes to financial
transactions, however, the books of accounts do not include them. Because certain values
cannot be quantified in terms of money, such as loyalty, honesty, and sincerity, they are not
documented in the company's books of accounts. This notion helps accountants decide what
to record and where to leave out of their financial statements (Gibson, Meredith and Peterson,
2020). 
Going Concern concept is based on the premise that a company's operations will continue
indefinitely (Groff, 2020). In a nutshell, it indicates that every company has a life span. As a
result, it will not be dissolving any time soon. An essential accounting assumption is that
assets have a life duration of 10 years; for example, a corporation acquires £100000 worth of
equipment and machinery as well as its life span is 10 years. As per this theory, a portion of
each year's income is classified as an expenditure, while the remainder is classified as an
asset. It's not appropriate to deduct the purchase price of an item that won't be utilised in the
firm for many years from the income of the year in which it was purchased. Some of the
value is recorded as an expenditure in the year of purchase, while the remaining portion is
recorded as an asset in the year after acquisition.
Accounting period concept refers that for a given time period, all transactions are
documented in the books of accounts with the idea that profits will be determined (Pahler,
2020). A balance sheet as well as profit and loss statement must be created on a regular basis
as a result of this notion. This is required for a variety of reasons, such as profit calculation,
determining financial status, and calculating taxes, among others. The underlying premise of
this idea is that a company's existence may be separated into discrete periods. The term
"Accounting Period" refers to these sections. There are a variety of lengths of time that may
be included in a contract (Simon, 2018). 
Accounting cost concept tells those accounts receivable and payable are reported at their
purchase cost, which comprises shipping, installation as well as acquisition costs, rather than
their market value (Stice, Albrecht, Swain and Stice, 2022). As a result of this accounting
practise, the value of fixed assets (such as a building, a plant, and equipment, and
furnishings) are included in financial reporting. XYZ Limited, for instance, paid £500000 for
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a machine used in the production of shoes. The machine had to be transported to the factory
at a cost of £1,000. £2000 was also spent on the installation of the device. The overall cost of
the machine would've been £503000, which will be reported in the company's books of
accounts.
Accrual Concept states that an accrued debt is a debt that has yet to be paid or collected at the
conclusion of an accounting cycle, such as accrued interest. It implies that income is
recognised as soon as it is owed to the company (Swieringa, 2017). The expenditures are
recognised as they become due regardless of whether or not cash is received or paid.
Transactions relating to both periods will be reported in the appropriate accounting period. A
difference is made regarding receipt of cash as well as the right to receive cash as revenue
and the actual payment of cash as well as obligation to pay cash as costs in accordance with
accrual accounting. Firms are entitled to payment on the day of sale if they sell items for Rs
55000 on March 25, 2005, and the cash also isn't received until April 10, 2005. For the year
ending March 31, 2005, it should be included as revenue.
The country's accounting authorities determine the rules as well as assumptions to be obeyed,
typically in accordance with international accounting norms (Wynder, 2017). The
accountants' time, effort, as well as energy are saved by adhering to the accepted accounting
concepts. It enhances the comparability of financial reporting as well as reports by making
them easier to comprehend, more reliable, more current, and more comparable.

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References
BARBER, W., 2019. A CRITIQUE OF AGGREGATE ACCOUNTING CONCEPTS IN
UNDERDEVELOPED AREAS. Bulletin of the Oxford University Institute of Economics
& Statistics, 25(4), pp.293-308.
Devid, E., 2018. Accounting concepts. Caulfield, Vic.: Australian Accounting Research
Foundation.
Fukui, Y., 2018. The Imagined Dichotomy of Accounting versus Economic Income
Concepts. Accounting, Economics, and Law, 1(2).
Gibson, C., Meredith, G. and Peterson, R., 2020. Accounting Concepts. [Place of publication
not identified]: Cassell.
Groff, J., 2020. Using a simple game to introduce accounting students to certain internal
control concepts. Journal of Accounting Education, 7(2), pp.263-269.
Pahler, A., 2020. Advanced accounting. Mason, Ohio: Thomson/South-Western.
Simon, D., 2018. Cost accounting: Concepts and managerial applications. The British
Accounting Review, 23(3), p.263.
Stice, E., Albrecht, W., Swain, M. and Stice, J., 2022. Accounting concepts. Australia: South-
Western.
Swieringa, R., 2017. Robert T. Sprouse and Fundamental Concepts of Financial
Accounting. Accounting Horizons, 25(1), pp.207-220.
Wynder, M., 2017. Visualising accounting concepts: insights from Cognitive Load Theory
for English as a Second Language students. Accounting Education, 27(6), pp.590-612.