Intro to Accounting Concepts

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Accounting Concepts and Conventions are general guidelines that all accountants should know and follow when recording day-to-day business transactions and preparing financial accounts. This unit outlines these main principles.

What are International Accounting Standards (IASs)

International Accounting Standards (IASs) are guidelines, rules or principles that direct how businesses record transactions and prepare financial Statements.

These standards are accepted, adopted and used by countries all over the world, including Jamaica.

The organization responsible for creating and updating these standards is the International Accounting Standards Board (IASB) – formerly the International Accounting Standards Committee (IASC).

Before IASs, each country had their own set of rules and standards that governed how businesses in that country prepared their accounts. However this could be very confusing and difficult where one organization operates in several countries. This means that the accountant would need to know the rules for all these countries. It could also present a problem for investors as the presentation for one country might not be understood if the investor is not from that country.

One of the reasons for forming the International Accounting Standards Committee (IASC) was to regulating the treatment of various accounting principles and financial transactions with a view to achieve international harmonization in the preparation of financial statements. In this way all the countries that adopt IASs would prepare financial statements in a similar way. This would prevent some of the challenges mentioned above.

Click on the link below for more information on the International Accounting Standards Board (IASB):

IASs and generally accepted accounting principles outline several underlying principles that must be adhered to when preparing financial statements. These are basic rules that every accountant should know no matter where in the world they are or what business they are working for.

The underlying principles are known as Accounting Concepts. They are as follows:

    1. Objectivity
    2. Duality/ The Dual Aspect Concept
    3. Going concern
    4. Accruals/ The Matching Concept
    5. Prudence
    6. Realization
    7. Consistency
    8. Historic costs
    9. Money measurement
    10. Business entity
    11. Materiality

In the next two sessions we will look at what each of these concepts entail and how they impact the preparation of financial statements.

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