Going Concern

The going concern states that when a business's accounting is being managed, it is understood by the lead accountant (controller) that the business is financially viable and will continue to be in business into the foreseeable future. The assumption is that the business is healthy enough to stay in operation. If for any reason the accountant determines that the business is not viable, and failure is imminent, then it should be stated in the financial statements. The reason should be outlined and well defined. If this is the opinion of the accountant and no evidence can be provided, then the accountant is free to include a disclaimer. However, lacking any credible evidence an accountant should be very cautious when issuing such a disclaimer.

Conservatism

This concept states that all liabilities are accounted for even if there is a chance that they will not occur. This same principle applies to liabilities and not revenues. The only revenues that can be accounted for are the ones that have already occurred. Any liability that might occur should be recorded and at the higher possible amount. For example, a company has been sued for a faulty product. The legal department has determined that the potential liability to pay claims will fall between $100,000 and $225,000. The higher amount should be accounted for in the financial statements. A note to the financial statements should disclose the liability range.

Materiality

This concept requires that accounting focuses on material facts and not on facts that are immaterial to determining revenues. Only transactions that have monetary information are recorded. If a transaction that has no bearing on income occurs, it should not be included in the accounts. Non-monetary information can be included in the notes of the financial statements if the information may affect the way in which investors evaluate the company. If the transaction or activity does not affect income today but may in the future, then these facts must be disclosed in the financial statements.

 

Notes

the double-entry accounting system - система учета по методу двойной записи

offsetting entry – компенсирующая проводка, перерасчет поступлений

accrual concept - концепция наращивания, принцип накопления

consistency – целостность, постоянство

the going concern - концепция непрерывности, ведение деятельности

conservatism – принцип консерватизма, осмотрительности

materiality - существенность, значимость