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The Purpose of General Accepted Accounting Principles (GAAP) is to provide the reliable information through financial reporting to the Users of Financial Statements . The purpose of Accounting Cycle is to record accounting data in a systematic way in order to show true and fair view of financial statements to users of financial statements. If the accounting cycle is not completed accurately, then fair representation of financial statements can not be made to give accurate and reliable information to users of financial statements. So the Importance of Accounting Cycle must be considered while preparing financial statements of company businesses. Note: Any mistake, error or fraud is Rectified And Corrected with Journal Entries in order to give true and fair view of Financial Statements to the users of financial statements.

Here we study about Accrual Basis VS Cash Basis of Accounting . Previously, we study in detail about these two Systems of Accounting in detail. Ø Accrual Basis Expenses and Revenues are recorded whether the amount of Cash is received or not, paid or not services rendered or  not. For Example, salaries paid to employees at the end of the month, rent for buildings, shops or transport, etc. paid in advance. It is wider term as it includes both Cash Transactions and Non-Cash Items. Under this system, we can see the real picture or situation of the company businesses because we also take into account the amounts of those events or transactions for which whether Cash is paid or received. Under this basis of Accounting, Management can take proper and timely decision because it shows real picture of company businesses. Ø Cash Basis In this system, Expenses and Revenues are recorded only when cash is received or paid. For 

Here we study about Substance Over Form Concept with Example, which is very important Accounting Concept . Substance Over Form Concept Definition And Meaning All the events should be recorded and analyzed on the basis of their substance and economic benefits and not merely on the legal form or ownership. This co ncepts emphasizes that i n a Busi ness Tra nsactio n, we take i nto accou nt two aspects (i) Legal Form which mea ns  Ow nership of Property or Asset (ii) Substa nce Form which mea ns   Eco nomic Be nefits, Rights A nd Risks associated with the Property or Asset.  Where o nly Ow nership of a n asset  is tra nsferred to other party but be nefit associated with that asset are  not tra nsferred, the n eco nomic be nefits are preferable over legal form. For Example, if an entrepreneur disposes of the an Asset to other person and transfers the ownership of asset but the future economic benefits associated with that particular asset are

Here we discuss about the topic “What is Notes to the Accounts” and it is the final step of “ Steps in the Accounting Cycle ” . Notes to the Accounts are explanations of important points that are necessary for the Financial Reporting of the company businesses. For Example, we show changes in accounting policies in the notes to the accounts’ section i.e. change in the depreciation method. This step of accounting cycle shows Materiality Concept of Accounting because users of financial statements read annual reports and always go to this section because this section explains the important points of financial statements of company businesses and helps them to make economic decisions. For the investors (which are one of the users of financial statements), it is very important to read this section to know about the various financial ratios like Profitability Ratios, Liquidity Ratios, Solvency Ratios, etc., of the company for making fu

Here we discuss about Materiality Concept Accounting with example. We already discussed about the Accounting Concepts topic. According to this concept, the information is material if its omission or misstatement could influence the economic decisions of users of financial statements. For Example, if the information shows good signs related to investments of the business as shown through current assets under the head of Assets of Balance Sheet, then investors are more interested in investing in the company businesses. This information is material as on the basis of this information investors can take decision whether to invest in the company businesses or not. All items which can influence the economic decision of the users of financial statements should be disclosed in the Notes to the Accounts’ section which is the Last Step of Steps in the Accounting Cycle .