In this article we will discuss about descriptive and prescriptive accounting concepts. Larsen and Miller have expressed the opinion that sets of accounting concepts differ in how they are developed and used. In general, when concepts are intended to describe current practice, they are developed by looking at accepted specific practices, and then making some general rules to encompass them. [...]
The following points highlight the four important postulates in accounting. The postulates are: 1. Entity Postulates 2. Going Concern Postulate 3. Money Measurement Postulate 4. Time Period Postulate. Postulate # 1. Entity Postulates: The entity postulate assumes that the financial statements and other accounting information are for the specific business enterprise which is distinct from its owners. Attention in financial [...]
The following points highlight the four main considerations which guide the selection of accounting principles. The considerations are: 1. Accurate Presentation 2. Conservatism 3. Profit Maximization 4. Income Smoothing. Consideration # 1. Accurate Presentation: One of the criteria for assessing the usefulness of accounting information is accuracy in presentation of the underlying events and transactions. This criterion may be used [...]