Select the Best Possible Way from Many Advanced Accounting Theories for the Growth of Business
The base of accounting process includes some advanced accounting theories that decide whether companies will make it in the business world or not. In the simple word, accounting refers to the record of all business and financial transactions so that it facilitates the strong control over the flow of money. It also denotes the types of profit that has been gained over a period of time. Seeing the variety in the business practices, we need several accounting theories to deal with the matter and stability of the business. There are basically four fundamental accounting concepts that specify and explain the guidelines. These guidelines are necessary for the managing and accounting of a business process.
The first concept is accrual theory. This theory explains that revenue and liabilities from transactions are accounted at the time they happen. It will also include all cash or property that did not come into transaction. The second advanced accounting theory of business is consistency concept. This accounting method is applied through all the further periods for the accounting in the business and cannot be changed in between. For example, if an accountant applies the double-entry method then he/she cannot switch to the single-entry method unless the accounting cycle is completed. Here all the accounting methods and procedures must be applied time and again to ensure the comparability of information in several periods.
Another accounting concept is ‘Going concern concept’. Here accountant is able to foresee the viability of the business that is operational. Such professionals have to formulate the reasons for coming to the conclusion in the financial report of the business. In case an accountant claims that a company will not remain in business and there is no sufficient evidence for opposition, the accountant may simply include a disclaimer in the financial reports stating that they believe, but cannot show evidence to prove that the business will not remain viable. One of the most popular advanced accounting theories is prudency concept. Here the accountant takes the account of liabilities in the balance sheet. Revenues are accounted in the financial statements. This particular concept helps to ensure that business makes rules and regulations to anticipate revenue that still has to be earned.