unit 6 d1
d1
Accounting conventions are the basic rules of accounting which have become acceptable procedures over time. They are the basic rules of accounting. Accounting standards are laws for members of the professional bodies to follow.
These are the different accounting conventions and regulations, and how they ensure that the financial statements meet their users’ needs.
Going concern this accounting convention is used to reinforce the assumption an accountant makes when preparing a set of accounts. The business under consideration will remain in existence for the future. In addition to being an old concept of accounting, it is now part of UK law. Reference to it can be found in the Companies Act 1985. Without this concept, accounts would have to be drawn up on what the business is likely to be worth if it is sold piecemeal at the date of the accounts. Such circumstances as the state of the market and the availability of finance are important considerations here.
Accruals This convention is known as the matching principle. The purpose of this concept is to make sure that all revenues and costs are recorded in the appropriate statement at the appropriate time. when a profit statement is compiled, the cost of goods sold relevant to those sales should be recorded accurately and in full in that statement. Costs concerning a future period must be carried forward as a prepayment for that period and not charged in the current profit statement. For example, payments made in advance such as the prepayment of rent would be treated in this way. Expenses paid in arrears must also be shown
Accounting conventions are the basic rules of accounting which have become acceptable procedures over time. They are the basic rules of accounting. Accounting standards are laws for members of the professional bodies to follow.
These are the different accounting conventions and regulations, and how they ensure that the financial statements meet their users’ needs.
Going concern this accounting convention is used to reinforce the assumption an accountant makes when preparing a set of accounts. The business under consideration will remain in existence for the future. In addition to being an old concept of accounting, it is now part of UK law. Reference to it can be found in the Companies Act 1985. Without this concept, accounts would have to be drawn up on what the business is likely to be worth if it is sold piecemeal at the date of the accounts. Such circumstances as the state of the market and the availability of finance are important considerations here.
Accruals This convention is known as the matching principle. The purpose of this concept is to make sure that all revenues and costs are recorded in the appropriate statement at the appropriate time. when a profit statement is compiled, the cost of goods sold relevant to those sales should be recorded accurately and in full in that statement. Costs concerning a future period must be carried forward as a prepayment for that period and not charged in the current profit statement. For example, payments made in advance such as the prepayment of rent would be treated in this way. Expenses paid in arrears must also be shown