Five fundamental accounting principles every ACCA student must know
Accounting principles are the backbone of any business. Following these codes for an accounting professional to the best of their abilities is crucial for building a successful career.
Developing an accounting career can be a rewarding experience. It can lead to great career pathways, such as financial accounting, tax advising, risk management and forensic accounting. The Association of Chartered Certified Accountants (ACCA) is a globally recognised qualification with operations in over 170 countries. For every aspiring ACCA graduate, it is important to understand accounting principles. The fundamental accounting principles are the backbone of financial decision-making. These principles are crucial to success in the field, whether in exams or real-world practice.
In other words, knowing fundamental accounting principles helps professionals make informed financial statements for a business. For any small-scale or large-scale company, having a strong accounting team is vital for organisation growth. An accounting professional is responsible for managing a company’s stocks, financial decisions and management. With accounting principles, a professional can ensure that a business's finances are handled effectively.
So how can a student gain an in-depth understanding of accounting principles? With the ACCA study in Dubai, students can learn about accounting principles, because these are important for both examinations and practical application.
Before moving forward, let us examine the importance of learning fundamental accounting principles for graduates.
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Importance of fundamental accounting principles
The importance of accounting principles for any business in today’s world acts as a backbone. There are chances of incorrect decision-making and creating wrong financial statements without an understanding of accounting principles.
With incorrect financial reporting, a business cannot reflect its true financial position. Accounting principles ensure accuracy, consistency and transparency, which help businesses succeed.
A business expects ACCA professionals to adhere to accounting principles for preparing financial reports and transaction analyses and maintain credibility.
This blog focuses on the fundamental principles of accounting. Let’s find out the five crucial accounting principles and concepts every ACCA student must know.
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Five fundamental accounting principles for ACCA students
To build an accounting career, students must build a strong foundation of accounting principles. If you are an aspiring ACCA student, the following principles of accounting will help you understand the core concepts of accounting for a successful career in the field.
- Consistency principle in accounting: Consistency in accounting terms simply means following one accounting method. It is applied in two ways, either from period to period within a reporting entity or in a single period across entities. For instance, if a business needs to compare its performance from the previous year, it can only be achieved if consistent accounting methods are used.
The consistency principle in accounting also helps businesses compare their performance with competitors to make informed investment decisions. Therefore, ACCA students must understand this principle for preparing appropriate financial reports.
- Materiality in financial reporting: Every year, businesses prepare financial statements to measure their growth. Materiality is one of the fundamental accounting principles that determines what information should be included in a financial statement.
For example, if a company fails to report a small expense, it will not affect decision-making; however, if a company fails to report a large expense, then it will negatively impact financial standing. Consequently, materiality in financial reporting refers to which piece of information is important enough to affect the decision-making process of users such as investors, lenders or regulators.
As an ACCA professional, you must be aware of the materiality principle to determine whether something is crucial enough for an organisation’s financial situation or not.
- Accrual basis of accounting: According to the accrual accounting principle, the revenues and expenses of a company should be recorded when they are earned or incurred, not when the cash is received or paid. It reflects a company's financial performance during a specific period.
For example, if a company provides a service in February and does not receive payment until March, then the revenue should be recorded in February when the service was provided.
Studying ACCA in Dubai will help students grasp the accrual accounting principle. This will enable them to represent the financial position of a company at any period. - Going concern concept: One of the most important fundamental accounting principles is the going concern principle, which states that the company is expected to continue to operate for a considerable period. It assumes that the business will not liquidate or shut down soon.
Financial experts usually assume that the business will continue to operate and meet its obligations, such as paying bills and debts on time. This principle helps companies make their financial statements, showcasing that their business will keep running and does not require selling off any assets right away.
It is important that ACCA students gain an understanding of the going concern concept it plays a key role in an organisation’s financial reporting standards.
- Accounting year concept: The accounting year or accounting period in fundamental accounting principles means that the business should calculate its economic activities into specific time periods. Businesses can divide it on a monthly, quarterly or annual basis for making financial reports and analyses.
Maintaining a financial report is imperative for a company because it helps stakeholders to understand the financial health of a company. It helps investors decide whether to invest in a particular business or not.
Therefore, organisations expect ACCA professionals to create income statements, cash flow statements and balance sheets that discuss the fiscal health of a company.
There are more fundamental accounting principles that organisations expect accounting professionals to grasp. By learning about each of these principles and concepts, candidates can prepare for their exams, interviews and a successful career.
However, the question arises: what is the best way to learn accounting principles? An ACCA course in Dubai can help you acquire an in-depth understanding of these principles and concepts.
How an ACCA qualification can benefit your accounting career
The ACCA education in Dubai can open a world of career opportunities. If you are passionate about accounting and want to build a successful career in the field, then an ACCA course is the answer. The course helps develop accounting skills and develop fundamental concepts of accounting.
The course teaches the fundamentals of recording financial transactions, business and technology, financial accounting, management information, maintaining financial records, management accounting and foundations in professionalism.
1. What can a student achieve from the course?
The ACCA qualification benefits students to become valuable members of ACCA. This invaluable addition would benefit a student’s resume. After passing the ACCA exams, students are eligible to earn a diploma issued by ACCA. Students can build a career in the public and private sectors in areas such as auditing and taxation.
2. Career opportunities after studying the ACCA course
Completion of ACCA study in Dubai provides an excellent platform for students to pursue higher education. They can either start their own business, join a leading company or teach ACCA concepts to other students.
Some industries where ACCA professionals can be employed are:
- Corporate finance
- The Big Four accounting firms
- Management consulting
- Technology and information systems
- Manufacturing and retail
- Non-profit organisations
- Banking and financial services
Choosing a specific pathway into accounting is worthwhile. ACCA study in Dubai enables students to make informed career decisions and open doors in industries across the world.
Pursue your accounting passion with GBS Dubai
At GBS Dubai, we help students discover new pathways by earning internationally recognised chartered accountancy qualifications. Our industry-experienced faculty support students throughout their education journey with us. The ACCA programme balances practical and technical accounting proficiency levels. You will also gain other essential skills such as communication, networking and teamwork.
After completing the Applied Skills level and ACCA Ethics and Professional Skills Module, students can submit a research analysis project (RAP) to Oxford Brookes University. Furthermore, they become eligible to earn the BSc Hons in Applied Accounting once. To fulfil this journey, our faculty will support you with your research paperwork and assignments and guide you towards various career pathways. Begin your ACCA study in Dubai with GBS and achieve success in your career.
FAQs about fundamental accounting principles for ACCA students
If you are keen to learn the fundamental principles of accounting, then pursuing an ACCA qualification would be an ideal option. The course focuses on core accounting principles and helps students develop skills highly valued by employers.
Every organisation needs to prepare financial reports and bills, manage company finances and create a balance sheet. For a successful career, students need to learn fundamental accounting principles, which employers seek in skilled professionals.
The consistency principle in accounting is one of the most fundamental principles. It intends to enhance financial reporting by making it easier for stakeholders or investors to make comparisons about business performance. An ACCA professional can help businesses prepare and maintain financial reporting standards.
The five basic accounting principles are:
- Consistency principle in accounting
- Materiality in financial reporting
- Accrual basis of accounting
- Going concern concept
- Accounting year concept
These fundamental accounting principles are critical to learn for an ACCA student because this can help them succeed in their career, as these principles are the core of any business.
The duration of the ACCA course in Dubai depends on level chosen. There are three levels of foundations in accounting, such as RQF Level 2, RQF Level 3 and RQF Level 4. Students can officially become members of ACCA after clearing the 13 vital exams.
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