Question

Choose at least two concepts in financial reporting you have learned and explain how you may use them in your present or future accounting position. Make sure you provide details to include how each concept will help you support the financial goals of the company you currently work for or will work for in the future. 

Answer 1

Accounting Concept - There are certain concept/rules that must be followed while preparing the financial statement of company these rules are known as Accounting concept.

Some of accounting principle are-

• GOING CONCERN -
  
  It Basically assumes that business that entity is doing is in good condition and will contiune for foreseeable future. Company's account are prepared keeping in mind the activities of business will cintinue forever. This is important concept as it is the basis of valuation of fixed asset, Inventory etc. Because of this concept depreciation expense is charged each year as a percentage of fixed asset.
  Company makes disclosure about going concern in their notes to financial statement. In case of absence of this concept the purchase price of asset will be shown as expense instead of capitalizing.
  The ultimate objective of company is to creat sharehoders value therfore this concept provide stakeholder assurance that it will provide income on their investment.
  
  If company forgo going concern concept then following journal entry will be passes for purchase of fixed asset -
                                          Fixed Asset A/c   Dr.              20000 $
                                                   To Cash A/c                                 20000 $

                                                  Profit And loss A/c Dr.          20000 $

                                                             To Fixed Asset A/c                    20000 $

• BUSINESS ENTITY CONCEPT-
  
  This concept make distinction between the owner and business of the company. That is its owner and business are seperate independent entities. Therefore the expense made of personal nature are seperately treated as per this concept. For example Harry is the owner of business and he withdraws 5500 $ for buying furniture for his house therefore that is personal expense. It will be sepeately treated -
  
                   Drawing A/c   Dr.      5500 $
                        To Cash A/c                    5500 $
  
  These drawing are not shown as part of income statement but shown as part of balance sheet.  
  Therefore this concept help in recording only business related transaction in the book of account. It gives true picture of profit by eliminating the income and expense which are not part of business.

        

---------------------------------------Answer is briefly made therefore any doubt are welcomed--------------------------------------