Answer to Question #215954 in Accounting for Naafu Peter

Question

1). Examine the role of accounting concepts in the preparation of financial statements. Do you find any of the accounting concepts conflicting

with each other? Give examples.

2). Discuss briefly the basic concepts and conventions of accounting?

3). Why should accounting practices be standardised? Explain.

Answer 1

1).The aim of financial reporting is to provide information that is relevant and useful. Accounting concepts deal with the standards and laws required to satisfy the needs of investors, employees, and other stakeholders. Both Accrual and Prudence accounting concepts conflicts. Accrual concept states all transactions should be accrued. This means all expenditure should be accounted whether paid or payable and all income should be accounted whether received or receivable.

On the other hand prudence concept states that all expenses should be accounted and the income should be accounted only if they are realized.

2).basic accounting concepts are: Business Entity, Money Measurement, Going Concern, Accounting Period, Cost Concept, Duality Aspect concept, Realisation Concept, Accrual Concept and Matching Concept. There are four main conventions of accounting: conservatism; consistency; full disclosure; and materiality.

3).Standardizing accounting principles bring about harmonisation which leads to the mobility of accounting professionals. Standardizing accounting practices wills faster internationalisation of accounting profession. Professional accounting firms can operate in different nations if there are uniform accounting practices and principles.