Theory Base of Accounting Test - 63

The term IFRS refers to the ' International Financial Reporting Standards' issued by International Accounting Standard Board (IASB).

According to the Revenue Recognition Concept in accounting, revenue should be recognized when it is earned and realized or realizable, irrespective of when the cash is received. Therefore, we do not record orders received for goods as revenue until the goods are actually delivered or services are performed. Until that point, it is considered unearned revenue or an advance payment, and it is not recorded as revenue in the financial statements.

IFRS are to develop in public interest, a single set of high quality, understandable and enforceable global accounting standards that require high quality, transparent and comparable information in financial statements and other financial reporting at faIr value.

According to Comapnies Act, 1956  revenue and costs are recognised as they are earned or incurred ( and not as money is received or paid) and recorded in the financial statements for the periods to which they relate. This concept is called accrual concept.

According to money measurement principle event or transactions which can be measured in the terms of money with a definite accuracy should be recorded in the books of accounts. Thus quality of labour which cannot be measured cannot be recorded in the books of accounts.

Financial Statements refer to such statemnets which report the profitability and the financial position of the business at the end of accounting period. And they also hep in the comparison of results from time to time.

According to the business entity assumption (also known as the separate entity concept), the business is considered a separate and distinct entity from its owner or proprietor. This means that the business's financial transactions, assets, liabilities, and performance are recorded and reported separately from the personal financial activities of the owner or proprietor.

There are in practice several different methods of calculation or recording of some events in the accounts. The consistency assumption requires that once a particular method of calculation or recording has been decided, the business enterprise will follow the same method for subsequent years for events of same character, to ensure uniformity in accounting processes and policies.

Materiality principle: The materiality principle is a concept used in auditing and accounting to determine the significance of an item relative to the financial statements as a whole. It is not one of the fundamental accounting principles.

Dual Aspect concept states that every business transaction is recorded as having a dual aspect. Thus everything firm owns i.e. assets of the firm will also be owed out to somebody that may be liabilities and capital. Thus Assets= capital + liabilities.