Accounting Principles

Define the following accounting cin sensation casepts and for each of them and give an rest slip to illustrate its application. a) Consistency Each business lead try to look at the regularitys which give the most true(p) point of the business. In preparing accounts, unity should be observed in both below aspects because always changing the modes would lead to deceptive profits being calculate from the accounting records. Therefore the formula of consonance is used. 1. Similar items inwardly a single circumstances of accounts should be given confusable accounting discourse. 2. The same treatment should be applied from unrivalled period to a nonher in accounting for connatural items. This enables validated comparison to be do from unrivalled period to the next. The consistency concepts says that when a business has once fixed a method for the accounting treatment of an item, it testament enter all similar items that follow in merely the same w ay. For example, depreciation slackly was calculated by Straight-line method or Reducing equilibrize system. If a companionship has chosen to use Straight-line Method in one class and Reducing Balance Method in next year.

It becomes nonmeaningful to make comparisons between 2 years depreciation figure to deliberate a analyzed picture and to let stakeholders and investors know the convince in depreciation within various financial periods. Actually, it is not reasonable to compare the two depreciation figures which is the product of different methods. The analysis will be misleading. b) Prudence This is the concep t that where preference procedures, or alte! rnative valuations, are possible, the one selected should be the one which gives the most cautions presentation of the businesss financial redact results. We should always exercise caution when dealings with uncertainty while, at the same time, ensuring that the financial statements are indifferent(p) that gains and losses are uncomplete overstated nor understated. This is known as prudence. We will...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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