Financial statements are prepared according to agreed upon guidelines. In order to understand these guidelines, it helps to understand the objectives of financial reporting. At Robert D. McCoy CPA, we make sure that financial statements follow the correct accounting guidelines.
In order to prepare the financial statements, it is important to adhere to certain fundamental accounting concepts.
Fundamental accounting principles guide any financial reporting. Information provided in financial statements must be useful enough that potential investors can make reasonable credit and financial judgments and decisions. Financial statements must present constructive information that allows investors to assess prospective cash receipts. The financial information should clearly define the changes and claims in economic resources.
Fundamental accounting helps existing and potential investors and creditors and other users to assess the amounts, timing, and uncertainty of prospective net cash inflows to the enterprise
Separate Valuation each asset or liability must be valued separately.
Only items material in amount or in their nature will affect the true and fair view given by a set of accounts. Historical Cost, Transactions are recorded at the cost when they occurred.