Profitability Ratios, Liquidity Ratio and Account Principles free essay sample

Accounting Principles and Concepts Business Entity the business is seen as a separate entity from its owner(s). Going Concern – this concept assumes that the entity will continue to operate in the foreseeable future, unless there is a clear evidence to the contrary. The balance sheet and profit and loss account on the basis that the assets will not be liquidated but have a continuing value to the business. Periodicity – the final accounts of the company, i.e. income statements (profit and loss account), balance sheet and, for larger companies, cash flow statements, have to be prepared on an annual basis. Money Measurement – transactions are recorded in money terms. Financial statements are drawn up with all revenues, expenses, assets and liability similarly express. Historical Cost assets, liabilities and expenses are all entered into the books of accounts at their actual cost to the business. Materiality – information is material if it could influence user’s decisions on the basis of the financial statements. We will write a custom essay sample on Profitability Ratios, Liquidity Ratio and Account Principles or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Duality – the double entry system is fundamental to accounting. Every entry into the accounts has twofold effect. Every time something is received, something is given; for every debit there is a credit. Realisation profit on a transaction is realised when the legal title of the goods has been transferred, the vendor then has a legal right to the receipt of the money. Matching costs are matched with revenues in a given accounting period. Accruals revenues and costs are recorded in the accounts as they are incurred, not as they are received or paid. Objectivity accounts should be: factual, free from bias, and verifiable.