Wednesday, 19 April 2017

Accounting Concepts

Accounting Concepts

In the business world, the science of accountancy holds a very important role in running the operations of the company, when the company applied accounting science properly, then the company can be more professional and discreet in making the decision so that the decisions taken are really supporting the success of the effort.

Understanding accounting according to the American Institute of Certified Public Accounting  defines accounting as follows: accounting is the art of recording, and the form of a unit of money and the results of the interpreter.


Fess accounting understanding is as follows: Accounting may be defined as a system of accounting which produced a report to the parties concerned regarding the economic activity and the condition of the company.

Accounting can be defined in terms of two, namely: First in terms of accounting sciences which means overall knowledge corresponding to the function of generating a financial information unit Organization to the parties concerned to provide the basis of decision-making. Both in terms of processes or activities are defined as activities of accounting record keeping, sorting, classification, compaction and the presentation of financial transactions of an organizational unit in a certain way.

The accounting is a service activity. Its function is to provide quantitative information, generally in the size of the money, about an economic entity is intended to be used in economic decision-making as the basis for choosing among several alternatives.


From the definition above contains two accounting terms. First, accounting services, meaning we have to make use of the existing sources – sources (for example: natural resources, labor and financial wealth) wisely so that we can maximize benefits for the welfare of the community, the good accounting system to measure and report on the costs of the use of these resources, it will be increasingly well informed decision taken to allocate it. Second, accounting provides information finance that is quantitative in use in relation to qualitative evaluation in making calculations. So the information will be provided for past beneficial economic decision-making in the future.

In general purpose accounting is presenting economic information from one unit to the economy – interested parties. While the results of the accounting process that shaped the expected financial reports can be helpful for users ' financial information.
Basic Accounting Concepts

In the application of accounting there are things to note regarding the basic accounting concepts, i.e. as follows:

Unity of effort (business entity)

According to the concept of unity and effort that is as follows: the concept that says that the accounting of the company or business unit should be regarded as persons or entities or organizations that stand alone, acting on his own, and separate from the owner.

Basic – basic recording

There are two basic kinds of record-keeping in accounting records used in the transaction are:
Cash basis, a basis of accounting that recognizes revenue and report it at the time of the cash received, as well as recognize the costs or burdens and reduce it of revenue at a time when spending cash to pay the fee or the load is done in a certain period.

Accrual basis, i.e. records every transaction that occurs without regard to the cash was received or not.

The concept of time period

That is a concept that States that use accounting periods as a basis in measuring and assessing progress of the company.

Monetary Unit

The monetary unit used as gauges of an object or activity company and assumes that the value of money is stable over time.


i.e. events or events within the company that could lead to changes in the amount of property, debt and capital.

Continuity of Business (going concern)

The accounting assumption that the company will run continuously until the time cannot be set or long enough to carry out his plan.

Concept of Matching

Matching Concept, defined as follows: the accounting Concept that supports the reporting of income and the related burden in the same period.

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