Accounting Theory

There are four basic concepts of accounting. The concepts offer and explain that the guidelines are followed, if the administration, accounts of a company. Here is a list of four basic concepts of accounting and a brief summary of each concept.
1. Draft Provisions
The concept of exercise as income from transactions and transactions, because of debt, if they occur, are considered, even when exchanging money or property in question is not really between units in the transaction. Even if he does not pay for the toothpaste to February, Dr. Payne recorded a liability of $ 500 in January and not wait until February because he owns property and is liable to pay them for the seller. For its part, the supplier charges for the sale of toothpaste to Mr. Payne.
2. Consistency Concept
accounting method has been applied some time by the auditors for all other periods throug these accounting methods to apply. The accounting method must be changed if there is a reason that change is necessary. For example, if the accountant starts recording transactions in the double entry method in January, he or she must continue using a double accounting for the remainder of the billing period. He or she should not start using the double entry, and suddenly the single entry accounting treatment center billing cycle switch valid for no apparent reason. This means that all methods and accounting procedures should be applied to improve the comparability between the periods of protection of information.
3. Concept of business continuity
If the accounting department of a company is managed, it should be assumed by the auditors believe that the company is profitable and is still operational in the near future. If the auditor has reason to believe that it is not viable to continue in the foreseeable future, he or she must give their reasons for coming to this conclusion in the financial statements of the company itself. If the auditor an opinion held by the company to stay in business and there are plenty of no evidence to prove otherwise accountants can simply add the warning in financial reporting, he or she thinks, but no evidence to prove that it does not remain viable.
4. Prudency Concept
The liabilities, although it is likely only one option for these requirements, although potential. However, revenues in the financial statements as the title company and these revenues are collected or will be in cash or other assets to collect in the future. In case of doubt or there is no sound legal basis for revenue recognition, it is not included in the accounts. This approach allows companies to make provisions for potential losses, not only the losses are realized, and that does not include false receipts basis set, but not yet won.