Define the following accounting c at oncepts and for each of them and give an reside slip to illustrate its application. a) Consistency Each business allow for try to look at the regularitys which give the most true point of the business. In preparing accounts, unity should be observed in both below aspects because always changing the rules would lead to misleading profits being calculate from the accounting records. Therefore the practice of consonance is used. 1. Similar items inwardly a single snip of accounts should be given confusable accounting discourse. 2. The same treatment should be applied from unrivalled period to another in accounting for connatural items. This enables validated comparison to be make from unrivalled period to the next. The consistency concepts says that when a business has once fixed a method for the accounting treatment of an item, it entrust enter all similar items that follow in barely the same way. For example , depreciation slackly was calculated by Straight-line method or Reducing equilibrize system. If a community has chosen to use Straight-line Method in one(a) family and Reducing Balance Method in next year.
It becomes empty to make comparisons between 2 years depreciation figure to reverberate a analyzed picture and to let stakeholders and investors know the channelize in depreciation within assorted financial periods. Actually, it is not reasonable to compare the two depreciation figures which is the product of different methods. The analysis will be misleading. b) Prudence This is the concept that where election procedures, or alternative v! aluations, are possible, the one selected should be the one which gives the most cautions presentation of the businesss financial grade results. We should always exercise caution when dealings with uncertainty while, at the same time, ensuring that the financial statements are indifferent(p) that gains and losses are incomplete overstated nor understated. This is known as prudence. We will...If you want to get a full essay, order it on our website: OrderCustomPaper.com
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