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Accounting Principal are set for conceptual understanding for accountants...
Accounting Standards described the list of rule that should be kept in mind during preparing financial statements.
Accounting Standard Homkies Aunmuzj basically aims to put the proper way to identify, measure, display and disclosure of elements of financial statements and the effect of transactions and other events and conditions on the financial position and results of business establishments Accounting principle Represents the fruit of scientific research howl logical justification and any principle that in order to acquire the status of an accounting principles, it is generally accepted to be the availability of the following conditions 1 to deliver a general acceptance in practice 2 that supports the agencies responsible for the regulation and development of the accounting profession It is the most generally accepted accounting principles Principle interview expenses revenues Historical cost basis The principle of full disclosure The principle of Relative Importance The principle of the policy of caution Principle of objectivity The principle of Revenue
Accounting Standard basically aims to put the proper way to identify, measure, display and disclosure of elements of financial statements.
General accounting concepts :
Relevance: Accounting information must be based on information directly related to the business being reported on .
Reliability: The accounting repots should represent an effective and faithful representation of financial events relating to business .
Materiality: This concept requires that all significant events be included in financial reports . An event is regarded as material if it is likely to effect financial decisions .
Comparability: If accounting reports are to be compared from one period to the next then the methods of accounting used must be consistent from one period to the next .
Understandability : It is of no value to present accounting reports which users are simply unable to understand .
Constraint of timeliness:Acts as a constraint to achieving the above qualities in reporting . timeliness indicates that reports are only of value if available within a reasonable time period .
Accounting principles
The impact of accounting principles (otherwise known as conventions, doctrines or assumptions) on the preparation and presentation of financial information is an important aspect of all Accounting units. These principles support the general accounting concepts.
These principles are described in the following pages. It is also important to recognise how they may be breached.
Accounting period The life of the business is broken up into arbitrary periods for the purpose of measuring profit.
Conservatism May also be known as prudence. Losses should be recognised as soon as the business is aware of their likely event whilst profits should not be recognised until they actually occur.
Consistency Accounting reports from one period to the next should be prepared on the same basis.
Dependability Data used in accounting should be subject to stringent internal control
Disclosure The owner is obligated to disclose any transactions of a significant financial nature in their reports.
Diversity Allows for the fact that no two firms are the same and therefore may use different accounting methods.
Entity Recognises that the business, from an accounting viewpoint, is separate from the owner.
Going concern Assumes that the life of the business is ongoing, indefinite and continuous. Also known as the continuity principle.
Historical cost All items are recorded at the original cost, that is, the cost at which they were acquired.
Matching Sets out the point of time at which revenue may be recognised
Materiality Is concerned with which data should be disclosed in financial reports. All transactions regardless of size should be recorded.
Monetary Only events whose impact can be measured in money terms can be treated as a financial transaction and thus entered in the books of the business.All transactions should be recorded in money terms.
Verifiability All transactions recorded in the books of the business are supported by documentary evidence
Accounting Standard is the set of rules that should be applied for measurement, valuation, presentation and disclosure of a subject matter. For example, measurement of deferred tax, valuation of assets, intangibles and financial instruments etc. and presentation and disclosure of such measurements and valuations.
Accounting Principles however, are the fundamental principles providing a framework within which accounting should be done. These principles also govern the formulation of Accounting Standards. For example, Accrual accounting, Substance over legal form, Prudence etc.
