Basic Principles of Accounting

Accounting practices follow certain rules. The set of rules and procedures that constitute acceptable accounting practice at a given time is GAAP, which stands for generally accounting principles. In order to generate information that is useful to the users of financial statements, accountants rely upon the following principles below:
basic principles of accounting


Objectivity Principle - Accounting records and statements are based on the most reliable data available so that they will be as accurate and as useful as possible. Reliable data are verifiable when they can be confirmed by independent observers. Ideally, accounting records are based on information that flows from activities documented by objective evidence. Without this principle, accounting records would be based on whims and opinions and is therefore subject to disputes.

Historical cost - Principle states that the acquisition of asset should be recorded at its actual cost and not what the management think about of its worth at reporting date Revenue Recognition Principles - in this state revenue is recorded when goods are delivered or the services has been performed or rendered

Adequate Disclosure - its means that all vital accounting information that affect the understanding of accounting firm should be disclosed on the financial statement Materiality -

Materiality - depends on the size and nature of the item judged in the particular circumstances of its exclusion. In deciding whether an item or an aggregate of items is material, the nature and size of the item are classify together. Depending on the status of its nature, either the size of the item could be the determining aspect.

Consistency Principle
- Compnay should use same accounting approach from period to period to meet the compatibility over time within a single enterprise. Nevertheless, changes are permitted if justifiable and disclosed in financial statements.



SEE ALSO:
Accounting Basics 

What are the Accounting Concepts?

Accounting is the most important function of every size business as it is based on certain accounting concepts and values and is different from book keeping. In fact, accounting is the process of dealing out with the bookkeeping statistics and obtaining some significant information from it.


What are Accounting concepts?


Accounting concepts are a set of wide principles which have been formulated to provide a fundamental outline or agenda for financial reporting. Basically, financial reporting involves certain specialized judgments’ by skilled accountants and these principles and concepts make sure that the users are not deluded by the acceptance of accounting policies and performance which go against the will of the accountancy profession. Therefore, the accountants must consider whether the accounting treatments are reliable with the accounting concepts and principles or not.

Accounting Concepts
Following are the concepts and principles of Accounting

  • Reliability
The information is reliable when the accountant or the user depends upon it to be perfect only if it loyally represents information that it claims to present. Well, certain omissions reduce the dependability of information in the financial statements.

  • Relevance
Information need to be appropriate to the decision making needs of the accountant as it helps the users in forecasting the future trends of the business or to confirm or correct any of the past predictions. 

  • Neutrality
Information contained in the financial reports need to be free from partiality and should reflect a balanced view of the affairs of the organization without challenging to present them in a preferential or special way. It must be neutral without any partiality. 
 
  • Faithful Representation
There needs to be trustworthy in presenting the financial statements with honest transactions which occur all during the period. This accounting concept is known as Farm or Substance over.

  • Prudence
Here there is need of financial statement preparation with the use of professional help in the adoption of accountancy estimates and policies. It requires that the financial accountants must work out a degree of caution in the acceptance of policies and certain approximation of income and assets.

  • Completeness
Depending on the information present in the financial report is achieved only when complete financial information is presented to the concerned business and other financial decisions making needs of the accountant. 

Consequently, information needs to be complete in all respects without any partial view.


See also:

How to become a CPA in Canada

The CPA or Certified Public Accountant is absolutely a valuable credential for developing a job career in auditing and accounting. It provides you in-depth understanding of accounting principles along with techniques and methods.
how to become cpa in canada Highly skilled experts in the business, accounting and finance area will often be needed. Having a CPA Canada certification, you can be assured that you’re qualified to fulfill Canadian and international marketplace requirements and that there's always an area to develop.

You can be a CPA in Canada if you overcome these steps:



1. Complete Your Education:

2. Whether you are learning to gain your CMA or CPA, just keep going for the reason that joining in the CPA you are required for your undergraduate degree.

2. Enrollment:

It does not require to write an examination to gain access to the two-year intensive plan. CPA must possess an undergraduate degree, and must have a particular subject or area of education coverage, Your local CPA office can reply any queries you acquire.

3. Selectiong Your Course:

Courses are made to develop your abilities and to pay attention to the chance to practise professional expertise, and expert values, honesty and behavior in a specialist circumstance. All CPAs are required to complete the 6 segments — two compulsory, two electives along with two capstone segments. Post-secondary colleges or institute is often approved to provide some or all the CPA Professional Program by graduate education programs.

4. Experience:

After accomplishing your course, you may start the job towards finishing the mandatory 30 months of appropriate practical experience (the minimal time period hasn't yet been decided in Quebec) to acquire professional expertise, skills, principles, integrity and attitudes.

5. Write the examination:

Just after finishing the segments, you will write the 3 day extensive final examination. The initial set will probably be provided in September 2015, then twice in a year beginning in May 2016.

To become a CPA is undoubtedly a smart decision, although stereotypes still remain creating accounting as tedious and excessively precise, the reality is that Canadian CPAs are those well-paid experts who have a vast demand throughout in the world. Having a CPA Canada designation, you will obtain a rewarding job career with endless possibilities.
See Also:
Tips on how to Pass the CPA Board Exam

What are the Types of Accounting

Accounting is definitely a wide and dynamic job. Accounting is the way of measuring, handling and communication of financial details of an organization. 

Accounting area is changing by implementing to the several demands of companies each level. Nevertheless, there are actually seven kinds of accounting:

Financial Accounting:  

It's the procedure for producing financial data for external use, normally available as fiscal reports. Fiscal reports reflect an organization's most recent performance and present position according to a number of accounting criteria. This normally consists of accounting, promotions, accounting benchmarks and rules that accountants are meant to follow in the planning of the fiscal reports.


Management Accounting:
 

These experts generate information mainly for inside use through the company's management. The information generated is usually more descriptive than that created for outer use to permit useful command within the company. Information could take the type of forecasts and budgets.


Tax Accounting:

This phrase describes accounting for the relevant tax issues. It's controlled by the tax policies approved by the tax laws and regulations of a legislation. Tax accountants regulate the fiscal statements organized under the financial accounting guidelines with policies provided by the tax laws.


Project Accounting:

Accounting method that is utilized to maintain an eye on the financial improvement of any project by regular financial statements. Project accounting could be an origin of competitive benefit of project-related businesses like construction companies.

Governmental Accounting:
It is also called public accounting, means the kind of accounting method utilized in the public sector. They require to get an individual accounting process for the public sector appears due to the various plans of the state and privately operated organizations.

Social Accounting:

It's also referred to as Corporate Social Accountability Reporting or Sustainability Accounting. Social Accounting is mainly described in the form of Environmental Studies associating the yearly reports of organizations. Social Accounting is still remains in the beginning stages of advancement.



Forensic Accounting:
They normally use accounting, auditing along with other surveillance methods in cases of lawsuit or accounting scams, that is occurring quite a bit nowadays. They are the professional witnesses in legal courts of the legislation on the issues concerning financial scams or litigations.

Introduction and what is Accounting Basics?

Accounting can be defined as the utilization of a system of formulas, terms & other record keeping devices which enables business persons to trace, compare and calculate their growth in the financial industry, or in a few cases recession. The general accounting concept, the equations in accounting, comprises calculating and recording assets of a particular business company, equity as well as liabilities. In this way, financial position of any business could be understood and assessed in a quick & easy manner. Other concepts which are more in-depth in the accounting industry include handling payroll, auditing, and investments for the companies.

Accounting is one important discipline in education

It’s taught in majority of the universities & colleges & even in a few of technical schools as well as high school classes. At the moment, there are numerous levels of specialties, degrees and govt. needed licenses which anyone can, or should, acquire in the accounting discipline. For centuries, accounting has been practiced & taught as a major discipline & it still continues to develop as researchers and practitioners in the accounting field encounter constantly changing business, legal and financial issues. Depending upon how an individual likes to be involved in accounting, he/she must get some type of training in the accounting arena. Accounting for big industries, for instance it might need whole teams or departments of expert accountants.
what is accounting basics
Conversely, somebody who just wants to keep track of his/her part time business finances will be able to manage accounting using a general knowledge of accounting formulas and concepts.
Accounting - An essential component of any commercial success
Accounting offers business administrators a method for evaluating the financial position of their company or business. With the help of this financial data, administrators can match the economic status of their firm to previous economic years or periods, set genuine aims for future fiscal years or periods as well as make decisions which depend upon or have an effect onto the capitals of their business.

In addition, accounting reports notify the employee of the firm, shareholders & the  public user regarding the financial standing of the company. Literally, by law, all the businesses are needed to file some type of accounting information to IRS or/and other financial & govt. entities. Auditing, whether external or internal, is a crucial function of company. Having efficient & sound accounting practices can make sure a positive audit.


See Also:

Related Post