Financial statements are prepared within the framework of accounting principles, concepts and conventions.
Separate entity concept and Money measurement concept are the basic concepts on which the other procedural concepts hinge
Accrual, Matching and Periodicity concepts work together for income measurement and recognition of assets and liabilities
Going concern, Consistency and Accrual concepts are the fundamental concepts, and these are followed in the preparation of financial statements. If any of these assumptions are not followed, then this fact should be specifically disclosed.
To have a record of all business transactions and to determine financial position of an enterprise, entities prepare financial statements viz., Profit and loss account, Balance Sheet, Cash Flow Statement, etc.
Relevance and Reliability are most important qualitative characteristics of financial statements
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