The same recordings of business are still being used today to keep a track of company’s profit or loss, assets, liabilities and owner’s equity for a given period. This information is very important, because it is a law in Ireland to keep your accounts up to date and record everything that comes in and out of business. It helps if the company becomes insolvent. Just by looking at business accounts it is possible to say where and when it all went wrong. Accounting must represent true and fair view of business accounts and there are certain concepts and conventions to make sure that information is accurate and consistent.
The 4 fundamental concepts are:
1. Going concern. This is solvent, currently operating business that is expected to continue operating in foreseeable future. At that point all liabilities and assets are recorded at their historical cost at the time when it was acquired even though its value might change in the future. When the assets are bought, it is assumed that company bought it to increase their income and it will continue to use it for their benefit. The assumption is made that they do not intend to resell it and they will fully use it.
2. Prudence. This occurs ...
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