Separate Entity Concept Analysis
One of the most important is Separate Entity Concept. It is an accounting Concept which considers a business separately from it’s owner. For example, if you (a business owner) will purchase an asset for your personal use, that asset will not be the property of the business. So, that means that I should separately record all business transaction from it’s owner personal transactions. Overwise, there is possibility that the transactions will mix up.
Also I have to say, that you can not draw funds from your business without recording it properly. Overwise, unrecorded money will be published in the business statements. You can see an example above in the Statement of Financial Position, which I have prepared for you, all Drawings are included …show more content…
Accounting information can tell you how wealthy and successfull you are, how much you own and how much you owe. This concept called as Money Measurement Concept, it is one of the concepts, what I would like to tell you about.
You can see on example in the prepared Income Statement. I recorded and did summary on your Sales, Cost of Sales and Business Expenses, and at the end we can see that Net Profit of your business is €75,570, and total Assets is €452,940, what in my opinion can say, that you business made a good profit in last financial year.
But I have to say that accounting will never tell you about other aspects of you business, such as how good or bad is your managers, if there are any problems with your employees, etc.
The Duality Concept. Under the Duality Concept we understand that two sides of accounting, one of them represents by the Assets and the other ones by the Liabilities. The concept states that both sides should be equal to each other.
In the Statement of Financial Position we can see that the Total Assets are equal to the Total Capital and …show more content…
While accountant working under financial information he has to be careful and prudent. Prudence is a key accounting principle which makes sure that business assets and incomes are not overstated, but liabilities and expenses are not understated. Preparation of financial statements requires true and honest relationship between accountant and financial information. Do not overestimate the number of revenues or underestimate the number of expenses. An accountant should also be conservative in recording the amount of assets and liabilities. In the result there are should be done conservatively-stated financial
Also I have to say, that you can not draw funds from your business without recording it properly. Overwise, unrecorded money will be published in the business statements. You can see an example above in the Statement of Financial Position, which I have prepared for you, all Drawings are included …show more content…
Accounting information can tell you how wealthy and successfull you are, how much you own and how much you owe. This concept called as Money Measurement Concept, it is one of the concepts, what I would like to tell you about.
You can see on example in the prepared Income Statement. I recorded and did summary on your Sales, Cost of Sales and Business Expenses, and at the end we can see that Net Profit of your business is €75,570, and total Assets is €452,940, what in my opinion can say, that you business made a good profit in last financial year.
But I have to say that accounting will never tell you about other aspects of you business, such as how good or bad is your managers, if there are any problems with your employees, etc.
The Duality Concept. Under the Duality Concept we understand that two sides of accounting, one of them represents by the Assets and the other ones by the Liabilities. The concept states that both sides should be equal to each other.
In the Statement of Financial Position we can see that the Total Assets are equal to the Total Capital and …show more content…
While accountant working under financial information he has to be careful and prudent. Prudence is a key accounting principle which makes sure that business assets and incomes are not overstated, but liabilities and expenses are not understated. Preparation of financial statements requires true and honest relationship between accountant and financial information. Do not overestimate the number of revenues or underestimate the number of expenses. An accountant should also be conservative in recording the amount of assets and liabilities. In the result there are should be done conservatively-stated financial