Gaap Assignment-Chapter 1…. 1.Business Entity Concept-.

927 WordsJan 18, 20174 Pages
GAAP ASSIGNMENT-Chapter 1… 1. Business Entity Concept- The Business Entity concept describes that deals and transactions related to a profession must be discrete from its business men(owners) and other business. For this, it requires that the data of the particular organisation and company must exclude the assets of other owners. The business entity is therefore considered to be distinct from its owners for the purpose of accounting. EXP. The owner of a business OR vocation loans $200,000 to his company. This data is accumulated by the company as a liability, and by the owner as an imprest receivable. 2.Continuing-concern Concept- Continuing- concern Concept is one the fundamental postulations in accounting on the substructure of which…show more content…
EXP. A bank loan is fortified by a promissory note. This is objective evidence of the imprest. without the reliability principle, accounting data might be predicated on whims and opinions. 5. Time-Period Concept- The-Time Period Concept is the concept that a business should report the financial results of its activities over a standard duration, which is conventionally monthly, quarterly, or annually. EXP. publicly traded companies are good for example. They typically engender quarterly financial verbalizations. Some companies even engender monthly or weekly verbalizations. 6.Recognition Principle- This principle tells that revenues and benefits should be recognised when the item and service is sold…. In the other words the rewards(revenues) bo shown on income statement during the time period when they are earned but not when the cash is collected.. EXP. A media company apperceives revenue when the ads are aired even if the payment is not received or where payment is received early. 7.Matching Principle- The principle that requires a company to match expenses with cognate revenues in order to report a company 's profitability during a designated time interval. Ideally, the matching is predicated on a cause and effect relationship: sales causes the cost of goods sold expense and the sales commissions expense. If no cause and effect relationship subsists, accountants will show an expense in the
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