The Modern Business Environment

1482 Words6 Pages
The modern business environment has evolved considerably during the past 10 years. Business technology tools have advanced up to levels which were practically impossible before. Today, Accounting is called “the language of business” because it is the source where all financial information comes from. However, Accounting is based on certain rules which all accountants must adhere. These rules are based on the Accounting standards and Accounting concepts. They form the framework and are the guidelines for good accounting practices. However, at times the accounting concepts may clash with each other due to conflicting objectives. The problem lies in the accounting conventions and concepts which do not provide a good starting point to improve the current accounting practice. The inconsistency of the concepts are as follows:- 2.1 Accruals and Prudence concept The Accruals concept makes it clear that expenses in the Profit and Loss Account must fairly represent the expenses incurred in generating that revenue, irrespective of whether the goods have been sold on a cash or credit basis. On the other hand, the Prudence concept compels accountants to be cautious while adopting certain policies. It states that profits and assets should never be overstated whilst expenses and liabilities should never be understated. The concept is summarized by the phrase “anticipate no profit and provide for all possible losses”. Furthermore, it reveals that all anticipated losses and bad debts
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