Have you ever thought of learning the basic concepts of accounting? If so, you are at the right place. Before that, you need to know what is meant by accounting in any business. The term accounting here refers to a complete system of collection and recording of financial information of any business.
The accounting system developed by Suzette Porter reveals that the main purpose of accounting helps you to prepare accounting summaries. Here, managers and others, like investors, can take appropriate financial decisions about the company or the organization.
Four Basic Concepts of Accounting
According to Suzette Porter CPA, the concepts of accounting in any business organization has been divided into four categories. They are known as the Concept of Accruals, Concept of Consistency, Going Concern Concept, and Concept of Prudency. These are basic concepts that give details and identify several guidelines of accounting to be followed in an organization.
The Concept Of Accruals
As a part of Suzette Porter accounting principles, you must know that the concept of accruals covers the revenues generated from transactions. Besides, the concept covers the liabilities occurring due to transactions as well. They are all accounted properly in a business. Through Suzette Porter CPA, the accruals concept includes even information on the actual exchange of property or cash between two businesses.
Concept of Accounting Consistency
Through Suzette Porter accounting principles, the system of accounting procedures is implemented by a certified accountant. However, consistency in these procedures must be maintained for all the periods in a year. However, the method of accounting can be changed, accompanied by a valid reason to change it. Accordingly, recording of transactions by using double entry method done in January must be continued throughout the year as well. On the other hand, if you record transactions using single entry method in the month of January, then the same method should be continued without switching to double entry method. From this, it is apparent that all the accounting procedures to be followed in a business must be implemented in a consistent way, using only one method. Through Suzette Porter accounting principles, this ensures the comparison of accounting information among periods.
Going concern concept of accounting
As a part of Suzette Porter CPA, it is assumed that the business is operational as well as viable in the future. This assumption is made only when the accounting of business is managed by a certified accountant. Through Suzette Porter accounting principles, it is possible that the accountant may find some reasons to indicate that the business is not viable. Accordingly, the accountant will record these reasons and conclusions in the financial report prepared for that business.
Concept of accounting prudency
Through Suzette Porter accounting principles, liabilities of a business are accounted for in the balance sheet. However, the accountant has to see the possibilities of its occurrence. Liabilities may be potential in nature as well. As a part of Suzette Porter CPA, the accountant will incorporate revenues in the financial statements.
Conclusion
The above are considered as the basic concepts in accounting to be followed and implemented in the business organization. These concepts when followed will help your business to make allowances for potential losses. They have not realized losses but included in the revenue statement in a default way. The losses are considered as anticipated and may not occur in reality.
