Theory Base of Accounting Test - 1

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

According to Revenue Recognition Concept the revenue is earned only when the goods are transferred. It means that profit is deemed to have accrued when property in goods passes to buyer. Thus accounting should take into consideration of profits only when the same have been realised and no anticipated profit should be recorded in the books. Thus order received is not any generation of reveue.

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 fiar 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 business entity concept, the task of measuring income and wealth is undertaken by accounting for an identifiable unit or entity. the Unit or entity so identified is treated different and distinct from its owners. 

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.

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.

Only those transactions and events are recorded in accounting which are capable of being expressed in terms of money according to money measurement concept. An event which may be importatnt for the business, eq competitor has launched a better product in the market, will not be recorded in the books of the business unless its effect can be measured in terms of moneywith a fair degree of accuracy. Thus, it ignores qualitative aspect of the business.