Four fundamental assumptions in preparing financial statements

Introduction When we talk about financial statements, we normally refer to the four main types of the financial statements. Those are statement of financial position which we normally call Balance Sheet, Statement of comprehensive income or income statement, statement of changes in equity and finally statement of cash flow. Each statement serve for different purposes. …

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Two Types of Assets in the Balance Sheet

Introduction In the Statement of Financial Position or Balance Sheet, there are three main elements. These are assets, liabilities and equity. Assets are classified into two types, current assets and non-current assets. Definition Before going further to each element of the assets, let’s understand the key definition. Basically, we give definition of assets in many …

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Types of Financial Statements

Introduction Basically, when we are talking about types of financial statements, we will firstly think about Income Statement, Balance Sheet, Statement of Changes in Equity as well as the Cash Flow Statements. Financial statements are basically arising from the the summary of business transactions as result of business activities during the course of day today …

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What is Materiality Concept?

Introduction When preparing financial statements; especially on the disclosure notes, we shall think of materiality. How should we disclose each item in the financial statements? Shall we put at lump sum amount or at separate notes? All of these questions would best describe about the materiality concept. So what is materiality concept? Definition The materiality …

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What is Matching Principle?

Introduction When someone ask about when shall we recognize an expense in corresponding to the revenue, we will think of matching principle. So what is matching principle? Definition of Matching Principle Similar to the accrual basis of accounting, the matching principle is the basic concept refers to the recognition of expenses of any particular period …

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What is Accrual Accounting?

Introduction The accrual accounting is one of the important concept in accounting that is widely used and referred to. Be for understanding about accrual accounting, let see on example below. Company ABC has paid a yearly rent in advance for US$30,000 on 01 January 2019. How would this payment shall be recorded? Shall the company …

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