The Isab Argues That The Accruals And Going Concern Concepts Are Key Underlying Assumption In The Preparation Of Financial Statements. Discuss The Problems For Companies In Applying These Accounting Concepts And Explain Why Other Concepts Might Also Be Considered To Be Important.
Accruals concept is the concept that attempt to correctly match all the accounting expenses (cost) to the income (revenues) to the year at which it occurs at that accounting period, thus referred to as accrued expenses. Whilst a going concern is an assumption that every business will continue in operation for the anticipated future, thus is a going concern for several years, unless if there is evidence i.e. owner acknowledgement. In the Introduction to Accounting Book by Marriott, Edwards& Mellett 3rd Edition it states, “The going concern concept assumes that the business is a permanent venture and will not wound up in the foreseeable future”
However, problems might arise in companies applying the two concepts, accruals and the going concern. Firstly looking at the accruals concept, “Under the accruals concept, revenue and costs are credited or charged to the profit and loss account for the year in which they are earned or incurred, not when any cash is received or paid”......
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The Isab Argues That The Accruals And Going Concern Concepts Are ...
The ISAB argues that the accruals and going concern concepts are key underlying
assumption in the preparation of financial statements. ...
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