Accounting Principles

Define the following accounting c iodin timepts and for each of them and give an catch ones breath slip to illustrate its application. a) Consistency Each business exit try to look at the regularitys which give the most tested point of the business. In preparing accounts, unity should be observed in both below aspects because always changing the rules would lead to mislead profits being calculate from the accounting records. Therefore the group of consonance is used. 1. Similar items inwardly a single hang of accounts should be given confusable accounting preaching. 2. The same treatment should be applied from unrivalled period to another in accounting for connatural items. This enables validated comparison to be do from unrivalled period to the next. The consistency concepts says that when a business has once fixed a method for the accounting treatment of an item, it volition enter all similar items that follow in barely the same way. For e xample, depreciation slackly was calculated by Straight-line method or Reducing equilibrize system. If a familiarity has chosen to use Straight-line Method in one form and Reducing Balance Method in next year.

It becomes empty to make comparisons between 2 years depreciation figure to contrive a analyzed picture and to let stakeholders and investors know the budge in depreciation within divergent financial periods. Actually, it is not reasonable to compare the two depreciation figures which is the product of different methods. The analysis will be misleading. b) Prudence This is the concept that where secondary procedures, or alternative valua! tions, are possible, the one selected should be the one which gives the most cautions presentation of the businesss financial do results. We should always exercise caution when dealings with uncertainty while, at the same time, ensuring that the financial statements are indifferent(p) that gains and losses are neither overstated nor understated. This is known as prudence. We will...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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