Question

Major concepts with which you should have some familiarity include:

0. ACCOUNTING

   • General accounting concepts (e.g., depreciation, cost allocations, variable/fixed costs)

   • GAAP term and meaning

   • Balance sheet items -- terms and meanings

   • income statement items -- terms and meaning

   • assists and liabilities -- terms and meaning

   • Cost and profit calculations

Major concepts with which you should have some familiarity include:

Answer 1

Various major concepts to be known by a professional related to the field of accounting includes:

1. General Accountancy:

The basics of a commerce related person is accountancy. Basic accountancy includes journal entries, knowledge of depreciation on various assets, method of its allocation, ledger posting, adjustment entries, option of adopting accounting method etc.

Depreciation method includes popular and most used methods are Straight-line Method(SLM) and Written Down Value Method (WDV).

Accountancy also includes cost accounting where there is allocation of cost into fixed and variable.

Fixed cost are those cost which are fixed in total but variable per unit.

Variable cost are those which varies with level of production.

In accounting, entity have the option to adopt either accrual method or mercantile basis of accounting.

In former, entity records entries on the basis of accrual concept whereas on later entities record only on cash basis.

GAAP - Generally Accepted Accounting Principles

It is the standard which is adopted by the U.S. Securities and Exchange Commission. It is the combination of authorative standards which are set by the policy boards and common ways of recording and accounting informations.

GAAP covers various concepts like revenue recognition, balance sheet classification and materiality.

Under GAAP, balance sheet items are required to be presented in decreasing order of liquidity.

The balance sheet under GAAP is presented as assets equal to liabilities and shareholders' equity.

Assets is the total of fixed and current assets.

Liabilities also includes both long term and current liabilities.

Income statement is classified into revenues,incomes, expenses.

GAAP presents income statement into

Revenue i.e. items generates income to the entity but interest revenue is presented separately.

Impairment losses i.e. decrease or loss in value of assets

Tax expenses i.e. tax paid to govt., local authorities etc

GAAP standards are to be followed by all public companies.