Talk To Accounting Expert MONEY MEASUREMENT CONCEPTīusiness transactions that can be expressed in terms of money can only be recorded in accounting. To know about other Globally Recognized Accounting Certifications
This is a wrong practise and is against the business entity concept which separates entity from the businessman/person running the business.
After digging deeper and looking at the expenses of the trip the auditor discovered that these expenses were not for business purpose but personal expense. Illustration 1: The auditor of the company A while analysing the balance sheet found an increase in expenses which was mainly recorded for travelling expenses. The underlying reason for this is that if these transactions are mixed together then the true picture of the business will not be visible. Similarly, the assets and the liabilities of the business should solely be used for business purposes. Personal transactions of the owner are to be kept separate from the business transactions. Here are 8 accounting principles every graduate must know: BUSINESS ENTITY CONCEPTīusiness entity and its owners should be treated as two different entities as they are distinct from one other. Therefore, accounting principles based on certain concepts, convention, and tradition have been evolved by accounting authorities and regulators and are followed internationally. Obviously, if each business organisation conveys its information in its own way, we will have a babble of unusable financial data. Accounting uses a formalised and regulated system that follows standardised principles and procedures. Recording every financial transaction is important to a business organisation and its creditors and investors. “Accounting is the language of business efficiently communicated by well-organised and honest professionals called accountants.”Īccounting not only records financial transactions and conveys the financial position of a business enterprise it also analyses and reports the information in documents called “financial statements.”
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