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Accounting - General accounting concepts

General accounting concepts

Relevance

Materiality

Understandability

Accounting information must be based on information directly related to
the business being reported on.

The accounting reports should represent an effective and faithful
representation of financial events relating to the business.

This concept requires that all significant events be included in financial
reports. An event is regarded as material if it is likely to effect
financial decisions.

If accounting reports are to be compared from one reporting period to the
next then the methods of accounting used must be consistent from one period
to the next.

It is of no value to present accounting reports which users are simply
unable to understand.

Acts as a constraint to achieving the above qualities in reporting.
Timeliness indicates that reports are only of value if available within a
reasonable time period.

Reliability

Comparability

Constraint of timelines

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