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![]() ![]() The absence of going concern accounting principle will ensure that organisations report their expenses without deferring them. The going concern principle is beneficial for investors, as it gives assurance that they will receive a return on their investment. This helps the accountant allocate the cost of the machinery over its useful life. Because of this principle, accountants can treat some items as assets instead of expenses because the business will operate and reap benefits from the asset in the future as a going concern.įor example, accountants report purchases of machinery as an asset instead of an expense because, as per the going concern principle, the organisation will continue in the foreseeable future. It means that the organisation will not liquidate and will not be dissolved. The going principle assumes that a business is likely to continue its activities for an indefinite period. You cannot reflect the same in your accounts as per the monetary unit principle. Due to inflation, the building costs ₹40 lakhs in 2016. This principle does not give importance to the concept of inflation.įor example, your organisation purchased a building worth ₹20 lakhs in 2012. The principle assumes that the purchasing power of money remains unchanged with time. However, you may record other types of transactions separately. That is why the monetary unit stresses reporting only those transactions that you can express in monetary terms. A business cannot report its assets as three buildings, two machines or one brand name. Money is the common unit used for recording business transactions such as capital, assets and liabilities. ![]() The monetary unit principle states that all business transactions must be in terms of money and Indian currency (₹). Here are 9 accounting principles you must know before stepping into the accounting industry: Monetary unit principle Related: Accounting Questions and Answers for an Interview When working in the accountancy field, you must know about general accounting principles and industry-specific principles. Also, some accounting principles are industry-specific and may not apply to other organisations. Often, these accounting principles are known as Generally Accepted Accounting Principles (GAAP). As these audits are a requirement of the creditors, lenders and investors, everyone in the accounting field needs to understand these principles. This comes in handy during external auditing of organisations. The principles are highly informative and reduce any confusion related to accounting. These accounting principles standardise the accountancy system by ensuring every organisation operating in India is honest and transparent in reporting its financial statements. ![]() The Indian Accounting Standard (Ind AS) gives the accounting principles in India. These principles help in maintaining uniform and consistent accounts for every company. View more jobs on Indeed View More What Are Accounting Principles?Īccounting principles are rules and guidelines that accountants and companies have to follow when reporting their financial statements. ![]()
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