Principles Of Accounting: Accounting And Financial Management

BAF 301

Accounting and financial management

Assignment 1

Mohammad Gholamali

20101147

Dr. Suja Sarah Thomas

Colleague of Electrical Electronics Engineering

Introduction

In this report I am going to write some of the important principle and assumption and guidance used to prepare accounting statements.

In the world of business there are some general rules and principles which the universe of accounting uses them as a general guidance. There are some international framework like Financial accounting Standards Board (FASB) that are consists of a set of rules which is used in recording and preparing accounting statements.

All of the accountants in the world follow generally accepted accounting principles (GAAP) as guidance for reporting financial statements. If one of the companies would like to share its financial statements for public, the company has to follow the generally accepted accounting principles for preparing its financial statements. Also if the company is trading its stocks to the public it is necessary for the company to notice its financial statements for other independent public accountants.

GAAP is very useful for all the accountants and its role is to regulate and standardize accounting definition, assumption and method. As we pass the time the generally accepted accounting principle becomes more complicated and complex this is all because of complex financial transactions.

Here is a list of some main accounting principles and guidelines which we are going to mention them below:

Economic Entity Assumption

Business transaction of business owner’s should be separate from a sole proprietorship transaction. For purpose of legality they are considered to be one entity but for purpose of accounting they should ...

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...able. For example if we have agreed with the ACD consultant to do the service for $10000, therefore this amount should be mentioned as $10000 revenues of ACD company even if he did not pay money.

Conclusion

By the end of this report we get to know more about the principles and assumptions used in preparing accounting statements. By using this assumption and principles of accounting we can be a good accountant who knows how to write a proper financial statement. Moreover using these assumptions are essential in preparing a financial statement of any company.

References http://www.accountingcoach.com/accounting-principles/explanation http://www.accountingverse.com/accounting-basics/basic-accounting-principles.html

http://www.cliffsnotes.com/more-subjects/accounting/accounting-principles-i/principles-of-accounting/generally-accepted-accounting-principles