Essay on Level 3 Business Unit 6

4660 Words May 8th, 2016 19 Pages
P1
From: Assistant Accountant
To: Manager
Date: 23rd January 2015
Subject: Describe how legislation and accounting concepts affect an organisation’s accounting policies.
In this report I will be describing how legislation and accounting concepts, could affect a business company’s accounting policies. I will also be talking what Acts contain, concepts and their importance, and also accounting policies. I will be supporting my work with examples.
Legislation is the law that has been made and also enacted by a legal or another government body and it is used to regulate, proscribe and provide.
(Reference: http://en.wikipedia.org/wiki/Legislation accessed on 23/01/2015)
Companies Act 1985 contains important documents. The important
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Consistency is when a business organisation adopts a certain method; the company has to make sure that they are only using the chosen method.
(Reference: http://accountingexplained.com/financial/principles/consistency accessed on 28/01/15)
Prudence concept is when a transaction is uncertain and therefore the profit is not recognised and unclear. If these sales are not completed, it could be a problem for the business organisation. This money will be recorded as bad debts in the profit and loss account.
(Reference: http://accountingexplained.com/financial/principles/prudence accessed on 28/01/15)
Matching or accrual concept requires the income and expenses of a business company to be recorded in the period of when they have been earned or spent. Accountants have to make sure that prepayments of expenses are recorded separately from accrued expenses, when financial statements have been prepared.
Accounting policies
Accounting policies are the principles and rules, which have been reported by special accounting entity, which specifies how transactions have to be recorded in the financial statements. Accounting policies are specified policies used by business organisations, when financial statements are being prepared. Not every business uses the same accounting policies, so if a business is a using a certain accounting policy, they must disclosure all the accounting policies that they follow when the accountants prepare the businesses’ financial statement.
Examples of

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