What Are The 5 Fundamentals Of Accounting?

Adele Hansley
May 22, 2021 07:10

Accounting data is collected for an accounting entity—which is further used to make financial reports. The entity is accounted independently from its owner or its other accounting entities within the equivalent organisation. An accounting entity must be the same as a legal entity; for instance, a department within an organisation or a university may be an accounting entity, but the company; or the university is the legal entity, can enter contracts and take legal actions in its right.

Accounting assignments are not as easy as it seems to be. Students from all over the world pursuing their academic degree in accounting are bounded to compose assignments to achieve their degrees.

Accounting holds a significant trend among students that the reason why students from all over the world are choosing this as a career. But the problem arises when they are required to complete their assignment, but they fail due to fundamental reasons such as not having enough time, information and knowledge. This is where they start searching for accounting assignment samples from online sources to solve their assessments tasks.

In this article, the 5 fundamentals of accounting will be discussed briefly so that students will never face any difficulties in the future.

Five Fundamental Concepts Of Accounting

  1. The Accounting Entity:

The accounting entities are generally assumed as the economic unit that segregates the accounting of certain transactions from other subdivisions or accounting entities. Hence, an accounting entity has a separate set of books or records detailing the assets and liabilities than those of the owner.

  1. Going Concerned:

Accounting is completely based on the assumption—business unit is a going concern. All the business unit's financial transaction records define that the business unit is a going concern, not a gone concern.

Otherwise, the banks will not provide loans, the employees will work adequately, the supplier will not supply the goods and services, and the transaction methods will not amend alter together.

  1. Accounting Period:

According to the going concern concept, the business unit is indefinite. To determine the profit or loss of a firm, profit & loss accounts and balance sheets are prepared at regular intervals of time and commonly at the end of each year.

The accounting period is the one-year cycle—whose purpose is to measure past performance, pay taxes, and nullify the effect of seasonal changes.

The accounting period allows knowing to regularly ascertain the company's correct position, i.e., at the end of each year.

  1. Accounting Equation:

It is most important to know what is accounting equation before writing Accounting Assignment Answer that will be accommodating for you with your bookkeeping and accounting:
Assets = Liabilities + Owner’s Equity

Let's understand this equation in detail, assumes buying a house. Let's say you purchased a home sold for $300K with an 80% mortgage ($240K) a 20% down payment ($60K).
$300K house (asset) = $240K mortgage (liability) + $60K down payment (owner’s equity)

  1. Double-Entry Accounting:

It is a system that implies debit will always equal credit. Every financial transaction to have an equal and opposite effect in two different accounts; likewise, we get some benefit, we pay some benefit.

For example, if the stock value increases, the liability will also increase in the form of creditors. Those two other similar and opposite effects are used to satisfy this equation:

Assets = Liabilities + Equity

These are the five fundamentals of accounting that every accounting student must know. Hence, if you face any trouble with your accounting assignment and need accounting assignment help, it will best if you approach experts to achieve excellent grades in their academics.

Adele Hansley
May 22, 2021 07:10
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