effect of early civilization on modern man

Essay by kemboizUniversity, Bachelor'sA+, May 2014

download word file, 1 pages 0.0

Why accountants embrace assumptions of accrual basis and going concern

Accrual accounting is a method of accounting for transactions that recognizes revenues and expenses in the period in which they occur. Accrual accounting does not take into consideration when money was received or paid

Accountants usually prefer these because it offers an accurate picture of the business of a company. It shows more clearly how much it cost the company in expenses to earn the revenue for that period.

Also by using accrual basis of accounting, the records of the business are kept more consistently. Every period shows exactly how much revenue a company earned and how much the expenses were for that same time frame hence simplifying the work of accounts.

Furthermore it matches with accepted accounting principle designed for businesses to match revenues and expenses together in the same period in which they occur. It recognizes revenues on the books when they are earned and expenses when they occur.

Going concern is assuming that a business entity will continue to operate in the foreseeable future without the need or intention on the part of management to liquidate the entity or to significantly curtail its operational activities.

Therefore accountants find it important because without the going concern assumption companies would not have the ability to prepay or accrue expenses. Reason is that if they don't assume that companies would keep operating then why would be prepay or accrue anything and the company may not be there long enough to realize the future expenses.

Greatly in the of assets area where the depreciating and amortizing assets are based on the idea that business will continue to operate into future .Again assets are put on the balance sheet because of the going concern.