Entity Concept Essay

Accounting is the methodical and full recording of financial transactions relating to a business, and it also denotes to the procedure of briefing, examining and evaluating these transactions to cross checking agencies and tax collection agencies. Accounting is one of the key purposes for nearly any company. It may be done by an auditor and accountant at small businesses or by substantial finance subdivisions with lots of employee’s at

The conceptual framework is an attempt to provide a metatheoretical structure for financial accounting. SFAC No.3 defines 10 elements of financial statements. It is obviously a resolution of the definitions presented in the discussion mem for the conceptual framework project. Elements are what accounting professionals measure and the attributes is about how to measure. Definitions can be helpful to the financial statements which have been formulated in order to help professionals to specify the qualification are. Also, the definitions must be expressed in the metatheoretical structure.

(1) Explain what the Stable-Monetary-Unit Assumption is (10 points) and (2) provide an example of its application. (10 points)

First, the properties being exchanged must be “like-kind”, “ this criteria is defined by its use, not its characteristics. For example,

Commodity is something of use, something that is valuable in most cases this refers to a

Example of Household Items: Lotion, Shampoo and Conditioner, Recyclable Grocery Bags, Shavers, Body Wash, etc.

Separate entity. This means that accounting shows financial activity of the business as a whole, not its owners or employees. For example, Dunnes Stores is a separate entity from founder Ben Dunne.

We see this today in materials used to make clothing, and even the way these clothings are being advertised and sold.

Plastic. So much of what we buy is covered with it. We affiliate ourselves so commonly with plastic that I’m certain you wouldn’t be able to give an intellectual definition of it. It would be like explaining what work is. When, for whatever reason, you look up the definition of plastic, you get three results: plastic the material (the noun), and the other two results both tell you how to use the word as an adjective. But there’s a completely different meaning for the word plastic that isn’t a part of the common definitions. That plastic defines me, at times as a student, but doesn’t always portray me as passionate soccer fan. That meaning is fake or flexible or even foreign.

The business entity concept provides that the accounting for a business or organization be kept separate from the personal affairs of its owner, or from any other business or organization. This means that the owner of a business should not place any personal assets on the business balance sheet. The balance sheet of the business must reflect the financial position of the business alone. Also, when transactions of the business are recorded,

Accounting transactions are professional occasion that has either a positive or negative budgetary impact on the financial statements. One impact of transactions in a financial statement will increase or decrease the accounts contingent on the transaction that has taken place. The history of revenue that has come or gone from the business will be shown on both financial statements and accounting transactions. Many businesses make several transactions daily. Errors can have a negative impact on financial statements, because the facts come from the accounting transactions

Accounting information can be useful in order to help predict future performance in the short and long term. It is important to note however that accounting information including accounting ratios show a company’s performance at a period in time. It is historical data. Trends can be identified by comparing data in sequential periods and future forecasts can be determined using historical data. There is no evidence or proof however, that these patterns will predict the future at a level of complete certainty. In my opinion, it would be hard to argue that decreasing profits over an extended period of time, or deteriorating liquid assets and increasing long term debt will have a

2. The money-measurement assumption which assumes that purchasing power of rupee is stable is a major limitation of the cost concept.

The definition of accounting theory according to Coetsee (2010) is described in two different ways. The first philosophy concludes that accounting theory is a set of general principles that guide the evolution of accounting practice. The other philosophy describes accounting theory as activity of explaining and predicting accounting practice. What the viewer can see from the statement of the first philosophy is that the accounting theory exists before accounting practices meanwhile the latter states that the accounting practice exists before the theory. Since there are many arguments about this matter, many academic researchers have concluded that accounting theory can be divided into two categories which are positive and normative theory.

Accounting is the art of measuring and communicating financial information. To maintain uniformity and consistency in preparing and maintaining books of accounts, certain rules or principles have been evolved. These rules or principles are classified as concepts and conventions. One of the important concept in accounting is “Measurement” (Mattessich, 1977)