Question

Discuss at least four issues that are important to accountants.

I need 2 pages of explanations

Answer 1

1) Accounting Concepts: The term 'concepts' is inclusive of basic conditions or assumptions on which the science of accounting is based. These concept are:

-- Dual aspect concept: Dual aspect concept is the underlying basis for double entry accounting system. The concept is based on the assumption that every transaction has a dual effect, which means it affects two accounts in their respective opposite sides

-- Separate entity concept: For legal purposes, a sole proprietorship and its owner are categorised to be one entity, however for purposes of accounting they are considered to be two separate entities

-- Going concern concept: This accounting principle is based on the assumption that a company will continue to exist long enough to carry out its goals and objectives and will not liquidate in the foreseeable future.

-- Money measurement concept: Economic activity is measured in money, and only transactions that can be expressed in money are recorded.

-- Cost concept: It is also known as the historical cost principle. The prices at which items were sold and brought are used for the valuations. Although real values do change during the course of time due to recession and inflation, however these are not considered for reporting purposes.

-- Accounting period concept: Accounting periods refers to the period for which financial books are balanced and the financial statements are prepared. Usually, the accounting period consists of 12 months.

-- Matching concept: This accounting principle requires the organisations to use the accrual basis of accounting, thus expenses must be matched with revenues

-- Realization concept: The concept states that the revenue can only be recognized after it has been earned.

2) Accounting Conventions

Accounting conventions is inclusive of traditions or customs or which guide the accountant while communicating the accounting information. These conventions are:

-- Convention of conservatism: If a scenario arises where there are two acceptable alternatives for reporting an item, conservatism states the accountant to select the alternative that will result in less asset amount and/or less net income

-- Convention of full disclosure: The convention requires that companies reveal every aspect of the functioning in their financial statements.

-- Convention of consistency: The convention proposes that the same accounting principles, policies and procedures when once used or applied must be used regularly on a period to period basis for preparing financial statements for facilitating comparison of financial statements on period to period basis.

-- Convention of materiality: The convention states that while accounting only those transactions will be considered which have material effect on financial status of the company and other transactions which have insignificant impact will be ignored.

　

　

　

　

In the world of accounting the double book-keeping is important because of the following reasons:

--It allows organisations to maintain an entire record of every transaction classified as assets, income/revenues, liabilities, expenditure, or capital losses/gains accordingly

-- Companies are able to make financial statements in an easy approach because it is a scientific method of recording company's financial transactions in a set of accounting records

-- The checks and balances are provided thus assists in preventing misappropriations and frauds as entire information about assets and liabilities are recorded.

-- The principle of matching help companies to accurately assess the revenue earned or loss suffered during a financial term together with details by preparing the Profit and Loss Account.

-- The company's trial balance will be beneficial in maintaining the books of accounts in an accurate way.

-- The company's financial position can be ascertained at the end of each accounting period, with the balance sheet preparation

-- The management can do comparative study of results of one year to another to know the change while making the important decisions

-- It provides detailed information for purposes of control permitting accounts to be kept in as much detail as required.

-- It follows a systematic technique approach. The chronological order along suitable financial transaction narration is helpful.

-- It provides arithmetical accuracy of the recordings of accounting transactions

-- In large business companies it suitable because they have heavy volume of financial transactions and resources

-- It provides reliable and accurate position of the company’s accounts; and management can know the position of business up-to-date

3) Accountant role as an analyst:

An accounting analyst holds the responsibility for entire diverse tasks to help businesses and consumers remain lucrative. The analyst makes a comparison of the present and past statistics to know where the business can be improve. Moreover the gathered information can be utilized predict future trends that involve money. An analyst is able to read several pages of financial statements and fish out where poor or waste spending habits is affecting the cash flow of the company. The role can be widened also and may include the banking strategies and profitable investments that would help the company make more money

4) Professionalism:

The accounting profession have obligations to shareholders, employees, creditors, suppliers, the government, and the public at large. Thus the accountants have their obligations go beyond their immediate client. Decisions that are made on information given by accountants can materially affect the lives of any or all of these stakeholders. Therefore Behaving ethically is an essential and expected trait. Also there are high expectations of society from the accounting professionals and people need to have confidence in them by providing quality of complex services. Thus, the information provided by accountants must be reliable, realistic, efficient, and are unbiased. Lack of accounting professional ethics is generally accompanied with qualitative characteristics of financial reporting that can provide an unrealistic picture of financial reporting. Without professional ethics, regardless of accounting rules and standards, accountants can provide manipulated financial reports. The existence of accounting rules and standards per se does not ensure an appropriate and sound financial reporting. Thus, combination of professional ethics and qualitative characteristics in accounting profession must be used. Developing professional ethics in an accounting profession lead to efficiency and effectiveness in enhancement of the quality of financial reporting.