Financial Management Essay Example | Topics and Well Written Essays - 1500 words - 3

Financial Management - Essay ExampleThey should who the business is before long progressing and how it is likely to perform in the future. Accounting has its objectives which it is supposed to fulfil. In order to fulfil these objectives, thither be purposes and conventions that have to be followed and adhered to. This essay describes ten bill concepts citing practical examples for each concept. The essay will have it off between the concepts which are contained in IAS1 from those that are not contained in the IAS1. IAS1 accounting concepts Consistency The first concept of accounting is the consistency. The accounting records should be consistent. The fiscal statements of one pecuniary year should be consistent with the financial statement of another financial year (Stickney, 2010). They should be easily comparable. There are instances where the methods used in the preparation of financial statement of a certain year are changed in the next financial year hence it becomes diffi cult to compare the two. This should only be done when the reason is very genuine and satisfactory. Otherwise, the methods should always be similar. A good real life example of the consistency concept is that of a company that uses straight line method in computing derogation of assets. In all the later(prenominal) years, straight line basis should be used in the computation. This will enable the comparison of depreciation in various financial years. Going Concern Under this concept, it is assumed that an entity should continue to operate for an questionable period. Recording of assets in the financial statement should be on the basis of original costs quite a than the market value (Stickney, 2010). In addition, the concept assumes that the assets will be useful in the business for an undefined period of time. The idea is that there is no intention to sell the assets in the foreseeable future. In preparing the financial statement, the management is supposed to keep in mind tha t the business will be in mathematical process for a long period of time and in case there are any plans that there are some assets which will be liquidated in the near future, disclosures should be made on the statements. A real life example of a going concern is where a business is being change to another person. The business will be sold with all its operations, liabilities and assets as they were under the ownership of the previous owner. Nothing should be changed since under the going concern concept, the business is expected to continue as it is indefinitely. accretion basis It is the requirement under IAS1 that the financial statements of a business entity should be prepared on the accounting accrual basis (Stickney, 2010). Only the cash flow is exempt from this requirement. This means that revenue is supposed to be recorded in the time it was earned. It does not matter when the money or the earnings will very be reliable. In the case of expenses, they should be recogniz ed in the year they were incurred and the time they have very been paid does not matter. For instance, if the business issues goods on credit in a certain financial year, this execution should be recorded in the financial statement of that year even if the money is to be received in subsequent year(s). Materiality In a business, there are transactions which have the might to affect the decision making of the management (Stickney, 2010). Such transactions