Question

accounting theories are the foundation for understanding your company's financial direction and developing strategies for long term success. What are some theories that a business owner should be aware of?

Answer 1

Accounting theories give an idea of ​​how to do it, how to follow it and the corresponding methodology, therefore the owner of a company must recognize these accounting theories to comply within the company.

We have the following accounting theories:

Comparable: It must be presented in a way, which may be compared thoroughly. Such as sales increased by way of 10% from the closing yr.

Relevant: Accounting information ought to be relevant; such as contemporary yr’s records with relevant facts have to be presented in economic report.

Consistent: Methods applied in accounting ought to be consistent; assume immediately line technique of charging depreciation is accompanied since last 5 years. If such technique is converting heavily, like instantly-line for this year and double declining technique inside the coming yr, then the system isn't regular and it doesn’t indicate smooth accounting.

Reliable: There should be reliability; such as coins bills are supported by way of respective vouchers of coins disbursements.