Question

a)Identify the qualitative characteristics of accounting

b)Describe the basic assumption of accounting

Answer 1

a) QUALITATIVE CHARACTERISTICS OF ACCOUNTING

The following are the qualitative characteristics of accounting:

1)RELIABILITY:it means that the user can rely on the accounting information .All accounting information is verifiable and can be verified from the source document.

2)RELEVANCE:It means that essentialand appropriatr information should be easily and timely available and any irrelevant information should be avoided.

3)UNDERSTANDABILITY:Accounting information should be presented in such a way that every user is able to interpret the information without any difficulty in a meaningful and appropriate manner.

4)COMPARABILITY:It is the most important quality od accounting information .Accounting information shoul be caparable with previous yesr also intra firm and inter firm comparison is also possible.It helps to ascertain the growth and progress of the business over time .

5)TIMELINESS:It means providing information to decision makers in time to be capable of influencing their decisions.

b) ACCOUNTING ASSUMPTIONS

There are some accounting assumptions which all entities generally follow,Unless it is specified it is assumed that these assemptions are followed.The basic accounting assumptions are as follows:

1)BUSINESS ENTITY CONCEPT

Business entity concept explains that the business is a distinct entity which is seperate from its owners

2)GOING CONCERN CONCEPT

It assunes that the business will continue for an indefinite period.

3)MONEY MEASUREMENT CONCEPT

Accounting transactions must have a monetory value .only those transactions which have a monetory value must be recorded.

4)ACCOUNTING PERIOD CONCEPT

The life of the business is divided into parts .Each part is an accounting period.

5)THE ACCRUAL CONCEPT

This concept is based on the recognision of both cash and credit transactions .here the revenue or cost is recognised as and when they occur rather than when actually receive and pay them in cash.

6)DUAL ASPECT CONCEPT

Every financial transactions has double effects .There are two sides to a transactions .Recognision of two aspests of the transaction is known as duel aspect.

7)REVENUE MATCHING CONCEPT

Earnind profit is a motive of business entities ,and the revenue of the business should match to the costs.