What is Matching principle in accounting?
Accounting principle that requires costs to be recognized after matching with the revenues earned associated with such costs i.e. the amount of costs recognized must be on equal footings with the revenues recognized. In other words costs shall be recognized at the rate at which benefits are rendered or revenue/income is earned by the entity. […]
What is Accrual basis of accounting?
According to accrual concept or accrual principle or accrual basis of accounting revenues and expenses are recorded in books of accounts when they are earned or incurred and not when they are received or paid in cash. In essence events of business are captured in accounting system when they are actually happening and not when […]
What is Journal and how many types of journals are in accounting?
These are the first formal books in which information regarding transaction is recorded . For the same reason they are also named as books of prime entry or books of original entry or day books. While making a record certain format is followed that only summarizes the information but also keep the value of information […]
What is the difference between accounting concepts accounting principles and accounting rules?
These three are definitely different but connected and their connection is critical in accounting. Under International Financial Reporting Standards (IFRSs) IASB Framework sets out accounting concepts in terms of: Objectives of financial statements: it is simple financial statements should be prepared in a manner that users can use the underlying financial information relating to entity […]
What is meant by Accounting concepts and principles?
Accounting is one of the vital tools to collect financial information pertaining to business activities. The same information is used in economic decisions users make. The apex of accounting or specifically financial accounting is financial statements that puts the gives the accounting records meaningful shape so that it can be used. However, preparing financial statements […]
What is the difference between Cash basis and Accrual basis accounting and which one is better?
Accrual basis of accounting is one of the underlying assumption for preparing financial statements under International Accounting Standards. IASB Framework clearly demanded the financial statements to be prepared on accrual basis instead of cash basis of accounting. Among other notable benefits of usig accrual basis of accounting over cash basis is that it helps record the […]
What is the difference between depreciation account and accumulated depreciation account?
Capital assets also known as fixed assets are simply such assets which are used over a period longer than one year. Although real cash outflow takes place for the whole price at the time of acquisition of such assets however, for reporting purposes such costs are not expensed out in the year of purchase of […]
What is Source document?
In the business world buyers and sellers interact to exchange goods and services and other transactions like payment. A diligent accountant keeps the record of all such important transactions about which users must be informed. However, to have the information reliable the recording of such transaction is controlled by source documents. Source document is basically […]
What is revenue recognition and accounting treatment for goods sold or sent on sale or return basis?
Before we discuss the recognition principle and accounting treatment for sales under sale or return conditions. First lets have ourselves clear about what is meant by sale or return? Under sale or return, the goods are sent by the supplier to the customer with an understanding that customer does not have to pay for such […]
What is meant by Economic benefits and how they flow to the entity?
It is easy to understand that entities around the world hold different sets of machinery, plant, equipment, building, land and other kinds of assets through which it offers products or services to its customers and in return earn income and generate cash. Products are made through different machines and the value these machines and equipment add […]
