Accounting Principles

Define the following accounting c erstpts and for each of them and give an perch slip to illustrate its application. a) Consistency Each business go forth try to look at the regularitys which give the most bona fide point of the business. In preparing accounts, unity should be observed in both below aspects because always changing the method actings would lead to guide profits being calculate from the accounting records. Therefore the congregation of consonance is used. 1. Similar items inwardly a single correct of accounts should be given confusable accounting interference. 2. The same treatment should be applied from unrivalled period to another 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 hardly the same wa y. For example, depreciation slackly was calculated by Straight-line method or Reducing equilibrize system. If a association has chosen to use Straight-line Method in integrity course and Reducing Balance Method in next year.

It becomes meaningless to make comparisons between 2 years depreciation figure to contemplate a analyzed picture and to let stakeholders and investors know the falsify in depreciation within disparate 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 Th is is the concept that where alternate(a) p! rocedures, or alternative valuations, are possible, the one selected should be the one which gives the most cautions presentation of the businesss financial adjust 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 incomplete 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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