Double Jeopardy Rule

Where there is a beginning, there must be an ending.  Like life, all proceedings, whether judicial, quasi-judicial or administrative must have a starting point and ending point.  In a jury trial, jeopardy begins or attaches when the selected jury is sworn; and attaches in a bench trial, when the first witness is sworn.  

Double jeopardy is being placed more than once in danger of being convicted and sentenced for the same offense, being tried twice for the same offense.  A criminal case however, may be re-tried without violating the rule on double jeopardy if a judge declares a mistrial.

In criminal case, when the accused is either acquitted or convicted or the case against him is dismissed or otherwise terminated without his express consent, by a court of competent jurisdiction, upon a valid complaint or information or other formal charges sufficient in form and substance to sustain a conviction and after the accused has pleaded to the charge, the conviction or  acquittal of the accused or the dismissal of the case shall be a bar to another prosecution for the same offense.   Double jeopardy can be invoked to defeat a second prosecution for the same offense.

  

Double jeopardy is addressed exclusively to criminal offense.  It is a constitutional right available to avoid a second jeopardy involving the same offense. The second offense upon which an accused is indicted must be identical with the first offense.  There is identity between the two offenses when the evidence to support a conviction for one would be sufficient to warrant a conviction for the other.  This is known as the “same evidence” rule.  Thus, an act resulting in multiplicity of crimes is not covered by the rule on double jeopardy. 

Double jeopardy is one of the most challenged and longest standing rule in the English law which dates back in the twelfth century.  From it, other legal systems have developed. The U.S. Constitution has adopted the rule in its Fifth Amendment.  It is a rule of finality, the laudable purpose of which is to put to rest the effects of the first prosecution.

Without the safeguard of this rule established in favor of the accused, his fortune, safety and peace of mind would be entirely at the mercy of the complaining witness, who might repeat his accusation as often as dismissed by the court and whenever he might see fit, subject to no other limitation or restriction than his own will and pleasure.  The accused would never be free from the cruel and constant menace of a never-ending charge, which the malice of the complaining witness might hold indefinitely suspended over his head.

  

Since the advent of technology particularly with the use of DNA evidence, constant debates on the issue of the abolition of double jeopardy rule have ensued.  There are pros and cons with respect to the abolition of the rule on double jeopardy.  Guilty people are not punished as argued by pro advocates. 

Further, they move for the reassessment of the justice system, which they believe, must be free to allow punishment of guilty persons for the crimes they have committed.  They argued that the offense has not ended despite the passage of time; that guilt is the ideal criterion to charge a person whether or not he has had a previous trial for the same offense; that injustices are not perpetrated on the victims as on the accused

  

Those who are against the abolition of the rule however, argue on the other hand that the double jeopardy rule does not only protect those “guilty persons” but protects everyone from the hazards of constant torment from the state. 

Innocent people charged and acquitted will not be at peace with the acquittal where there is no assurance that the case has finally ended; that another prosecution might happen in the future.  They argue that for a justice system to be working, it must provide an indubitably clear termination of a case.   

The meaning of rule of law will be less significant if it exist in a never-ending state of expected countermand.  The abolition of the rule would result in the deterioration of the investigatory and prosecution processes because of an assurance that a second trial is available.  There will be no end to a fishing expedition of evidence.

  

The rule however was not without any reformation. If there is compelling new evidence, a murder case could be retried, thus, resulting in the abolition of the double jeopardy rule on murder cases. The rule on double jeopardy not only enhances the ability of the state to prosecute and protects the integrity of final judgments but also protects the accused from the stresses and burdens of multiple judicial prosecutions.

PureComfortLinens.com, the ecommerce outlet of Vicera Enterprises, Inc., a duly registered corporation, offers a wide variety of high quality bedding and accessories for every bedroom in your house. It carries simple and colorful linens, stylish bedspreads, conventional comforters with self corded edge finish, etc., balmy pillows, beautiful pillow cases and other bed accouterments. We have been providing consumers with durability and comfort at reasonable prices.

Fair Value v. Historical Cost

Financial statements are the end-products of the accounting process which serve the financial information needs of various interested parties. The financial statement should be a faithful representation of the economic activities of the business.

While a full description of the actual economic activity of the organization is not possible, the financial statement should contain as full and as faithful a representation as feasible. The report should be accurate and timely, consistent with preceding statements and containing the adequate amount of disclosure.

The degree to which the financial statements accurately present the economic status of the company depends to a large extent upon the assumptions and procedures inherent in the accounting process (Kimwell, 2005, p.50).

The balance sheet gives one input that is helpful information in determining the degree of financial risk. The most important thing to remember in preparing financial reports for management use is that a report prepared in accordance with generally accepted accounting principles may not be useful for decision-making. This means that the conventional balance sheet may have to be adjusted before it can be helpful to management.

The balance sheet is important to the extent that it provides a comprehensive overview of the financial position of the business. This attempt at comprehensiveness also accounts for the principal limitations. Despite the usefulness of the information furnished by the balance sheet, there are limitations and criticisms leveled against the statement.

The balance sheet reflects only those activities that can be reduced to monetary terms. Many items which are of financial value to the company are not shown in the balance sheet. For instance, such items as market position, superior products, capable personnel, favorable location, high credit standing, are not quantified in the balance sheet. Estimates enter into the preparation of the balance sheet. The estimates are significantly pronounced in the matter of reporting receivables, plant and equipment, inventories and intangibles and certain liabilities.

The balance sheet does not show the current value of the company assets and of the company itself. The assets are generally shown at cost, and very often, there is a significant difference or variation between historical cost and current market values. Thus, the net worth of the company is not also measured accurately. It may be overstated or understated because assets are not in conformity with current values.

In view of these limitations, proponents of fair value accounting consider that the most relevant appraisal for financial reporting is fair value. However, others argue that since fair value is based on estimates, it may not be reliable and confirmable, thus historical cost is more valuable in measuring the economic status of the business.

Further, it is contended that a dynamic and sheer market is not available for numerous assets and liabilities. Thus, gauging fair value will be subjective thus; appraisal will also be less dependable. When market prices are not available, reliability of financial reports will remain to be an issue whenever management will use fraught judgment in choosing market data (“Fair”n.d.).

The major concern now is management bias that it possibly exists. Management preconception has the effect of unreliable financial information and measurement of fair value estimates. Earnings management happens even under the historical cost accounting measurement. Thus, without a reliable basis for fair value estimates, the possibility of misstatements of accounting data will even be more expectant.

In recent years, there were cases of over valuation of some assets when there were no active market prices and substantial reduction in the book values of these over valued assets resulted in failure of some financial institutions and businesses (Bies, 2004, p. 27)

It is difficult to verify estimates based on management judgment. Significant effort has to be exerted by financial users including auditors in comprehending on how the accounting information was measured. The reliability of these data is also a problem when making decisions based on this valuation. Fair values contemplate estimates and there result in non transparency of financial information.

Financial statements must be transparent. To serve the purpose of fair value estimates, as it is now increasingly suggested by users of financial information as a basis of measurement, additional disclosures are necessary.

SFAS No. 107 (FASB 1991) requires entities to disclose fair value estimates for many of their financial instruments (e.g., loans, securities, derivatives, receivables, payables).

SFAS No. 119 (FASB 1994) amended SFAS No. 107 to require that the fair value estimates be presented together with the related book values and without combining the fair value of derivative financial instruments with the fair value of non derivative financial instruments (Nissim, 2003, p.356).

With these accounting standards, users of financial reports can now compare the fair value estimates with the accompanying book value, thus serving the purpose to make the information more reliable and relevant.

Relevancy and reliability is the debatable issue in fair value over historical cost accounting. Fair value advocates strongly argue to move to fair value accounting because financial statements generated by historical cost do not provide investors with relevant information they need.

“The fact that the market value of publicly traded firms on the New York Stock Exchange is five times their asset values serves to highlight this deficiency” (Shortridge, Schroeder,& Wagoner, 2006, n.p.). According to proponents of fair value accounting, historical cost financial reports are not relevant as current values are not presented.

Even if the information is less reliable, they contended that fair value measurement is still appropriate as they are relevant to decision-making. Fair value accounting generates information that are more representative of the company’s worth.

PureComfortLinens.com, the ecommerce outlet of Vicera Enterprises, Inc., a duly registered corporation, offers a wide variety of high quality bedding and accessories for every bedroom in your house. It carries simple and colorful linens, stylish bedspreads, conventional comforters with self corded edge finish, etc., balmy pillows, beautiful pillow cases and other bed accouterments. We have been providing consumers with durability and comfort at reasonable prices.

Communism and Socialism

Communism and socialism differ philosophically, politically and economically. Communism is a political orientation that attempts to constitute common ownership of the resources by which goods and services are created under an egalitarian social establishment. Philosophically, it is a political theory that, it is the state that should benefit from individual’s action and not the individual. It is sometimes called Marxism-Leninism because it is associated with the revolutionary doctrines of Marxism and Lenin, a radical collectivism (Saint-Andre).

Socialism, on the other hand, is an encompassing range of philosophies or political efforts to increase social and economic equality through a system of control. It conceives of a system where property and wealth distribution are controlled by the community. It is also a kind of collectivism less crouched than communism, characterized by hyponymy of the individual to the community (Saint-Andre).

Socialism connoted Nazism, short for National Socialism under Adolf Hitler of Germany during the Post-World War I era. Hitler called himself a socialist. He looked at capitalist society as cruel and unfair, thus, defended the rights of workers and searched for a third system between communism and capitalism. He aspired at establishing a kind of socialism which averted inefficiencies that blighted the Soviet diversity. Hitler expressed strong disfavor on selfish individualism as he saw it as endemical to modern Western society and treasured to supplant it with a moral principle of selflessness.

Hitler, however, was to a greater extent, similar to his communist precursors. The Russian Bolshevist maneuvers of grabbing power have been simulated by the Nazis. Hitler embraced the one party system and the favored role of the Communist party members in public life, the secret police and the imprisonment and execution of enemies and the use of public funds to finance sabotage and espionage and other know-hows of propaganda. In this regard, German’s socialism and Russian communism is similar.

Nevertheless, admirers of Hitler argued that under the Nazis, there was initiative and free enterprise. However, no deviation from the orders issued by the government was allowed in the conduct of business operations. The Nazis did not divest the entrepreneurs and capitalists overtly and the principle of income inequality which the Russians conjoined in the first years of Soviet rule was not adopted.

All the same, the Nazis removed the bourgeois or capitalists entirely from control. They remained in their stead in the economic social system but almost salaried public servants compelled to comply with the orders of the Reich and Nazi party. The Nazi did not advocate public ownership of the means of production, contrary to the Marxists. Marxist notions of class struggle were in fact rejected by Hitler. He wanted Germany to be one interconnected totally under him. He wanted that the Nazi Party will be called a labor party, not a communist party. Hitler, as he rose to power, rebuffed the unlimited nationalization of industry as excessively Marxist (Ray).

Since the 19th century, opposing doctrines and movements referred to as socialist, have not agreed on a common doctrine. Social democracy, a political ideology emerged during this period urged by the social democrats. Modern socialists purport to democratize capitalism through state regulated organizations and programs aimed at getting rid of inequities brought down by capitalism. Unlike socialism which aspires to control the dominance of capitalist market system, and Marxism which designs to supplant it completely, modern socialist democracy aimed at reformation and amelioration of the existing injustices of capitalism (Ray).

Marxist theories motivated socialist parties across Europe in the late 19th century. Their policies later developed into reforming capitalism rather than subverting it, except the Bolsheviks a party headed by Vladimir Lenin who succeeded to control Russia in l917.

The party called Russian Social Democratic Labour Party changed its name to Communist Party in 1918. From then on, Socialism and communism were often used as complementary terms. Lenin and Marx regarded socialism as the first stage of communism and used the term, communism as the higher phase of communism, thus established the modern-day distinction between communism and socialism (Walters).

Socialism and communism are both systems of creating goods and services founded on the working class ownership of the resources for production. Socialism is the first level of a new system that develops directly from capitalism. Further development of socialism is communism which is the ultimate stage. Socialism therefore, is the necessary stage for the shift from capitalism to communism.

Distribution of wealth according to deeds is the underlying principle of socialism, whereas, for communism, the distribution is according to the needs. The former is forthwith achievable but the latter is not immediately possible. For the reason that the only immediate option of capitalism is socialism, socialists as well as communists advocates sustain as their destination, the institution of socialism.

The difference lies on the fact that communism is out to destroy totally the capitalist class by changing the character of the state, from capitalist dictatorship to working class dictatorship. While socialism believes that there is no need to change the previous capitalist government machinery and put up a new one but rather to make use of the said old system and rise gradually within a democratic capitalist framework.

Economists of the 20th century criticized socialism as a failure; that a socialist economy will never succeed because allocation of resources is dependent on market prices information. As to the Soviet regime, the only definitely known reality, according to them, is the living standard of the Russian common people that is very much inferior compared to that of America which is the embodiment of capitalism.

PureComfortLinens.com, the ecommerce outlet of Vicera Enterprises, Inc., a duly registered corporation, offers a wide variety of high quality bedding and accessories for every bedroom in your house. It carries simple and colorful linens, stylish bedspreads, conventional comforters with self corded edge finish, etc., balmy pillows, beautiful pillow cases and other bed accouterments. We have been providing consumers with durability and comfort at reasonable prices.

A Law May Be Harsh, but It Is Still the Law

It is never right to break an unjust law. The law may be harsh, but it is still the law. Until such time that it is declared unconstitutional, it deserves to be respected and obeyed no matter how unfair the said law is.

When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall prevail. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse or custom or practice to the contrary.

No judge or court shall decline to render judgment by reason of the silence, obscurity or insufficiency of the laws. In case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail.

The term “law” in its widest sense means any rule of action, norm or conduct, or expression of uniformity. In its most comprehensive signification, law is applicable indiscriminately to all objects of creation, whether animate or inanimate, rational or irrational (Blackstone, Commentaries, I p. 38), as well as to intangible processes.

Law is the factor that holds organized society together. Where such element does not exist, there is only a lawless group. To the extent that a group of men are held together as a society by such factor, to that extent it has a legal system, crude or highly developed as the case may be.

The concrete statutes, customs or judicial decisions prevailing are only so many facets of that overriding, super eminent factor. When a particular rule or act promotes the efficacy of this factor, it is a lawful act or a good rule; if it derogates from the effectiveness of this element, it is an unlawful act which should be changed.

The burden of proving that a law is unconstitutional is reposed on the individual suitor or challenger because of the presumption of constitutionality of a law. Laws are meant to be followed; otherwise, there will be chaos, disorder. Law is like a nuclear force that holds the atom together, without it there shall be destruction (Aguirre, A. p. 193).

PureComfortLinens.com, the ecommerce outlet of Vicera Enterprises, Inc., a duly registered corporation, offers a wide variety of high quality bedding and accessories for every bedroom in your house. It carries simple and colorful linens, stylish bedspreads, conventional comforters with self corded edge finish, etc., balmy pillows, beautiful pillow cases and other bed accouterments. We have been providing consumers with durability and comfort at reasonable prices.

Bed Linens Online Sales – When to Recognize Revenue

Consider the case of a company that manufactures and sells bed linens online. In accounting, revenue from these finished goods is said to be realized at the time they are delivered to the customer, not at the time they are manufactured or at the time orders are placed by customers.

Suppose that in 2009, bedding comforters sets were manufactured. In January 2010, a customer placed an order of these goods. The goods were delivered in February 2010. When is revenue realized? The revenue is realized in February.

As you may surmise, in the case of a company that sells services, rather than goods, revenue is recognized at the time the services are furnished or rendered and not at the time it was contracted.

Suppose that in January, Window Treatments Unlimited contracts to install valance board and curtains to Mrs. Jones windows. The valance board and the curtains were installed in February. Mrs. Jones pays the price in March. In what month would Wall Treatments Unlimited recognize revenue? Wall Treatments Unlimited would recognize revenue in February.

The fact that revenue is recognized at the time it is realized is called the realization concept. This realization concept tells us when to recognize revenue.

Revenue is realized when a sale is consummated through the delivery of goods or services. Because of this, the word “sales” is sometimes used as a synonym for revenue, and sometimes you will see the phrase “sales revenue.”

As in the case of expenses, revenue may be recognized before, during or after the period in which the associated cash receipt falls. To begin with, let us consider a case in which revenue is recognized in the same period as that in which the associated increase of cash occurs.

Using the same example above, in January, Window Treatments Unlimited installed valance board and curtains at Mrs. Jones house; Mrs. Jones pays $100 cash. In keeping with the dual aspect concept, this transaction will have two effects on the accounts of Window Treatments Unlimited. It will change both sides of the balance sheet – i.e., the assets and the equities.

This transaction will affect the Cash item on the asset side of the Window Treatment Unlimited balance sheet. That is, the following changes would be made: Cash increases by $100; Owner’s Equity increases by $100.

In January, Mattress Pads Company sells and delivers mattress pads to Mr. Ace, who pays $50. In this example revenue is recognized at the same time as the related cash receipt.

On January 5, 2010, Mattress Pads Company sells on credit to Mr. Jack for $60. Mattress Pads Company bills Mr. Jack, requesting payment within 30 days. In this case revenue is recognized prior to the related cash receipt.

When revenue is recognized prior to the related cash receipt as in the case above, the increase in revenue is accompanied, not by an immediate increase in cash, but rather by the right to collect the cash, which is called an account receivable.

Thus the two entries necessary to record the above transaction would be: Revenue or Owner’s Equity increases, $250; Accounts receivable increases, $250.

When a customer pays a company for a business he has previously made on credit, the company records an increase in cash and a corresponding decrease in accounts receivable.


Thus when Mr. Jack sends a check for $60 to pay for his mattress pads, Mattress Pads Company makes the following entries: Cash increases, $60; Accounts receivable decreases, $60.

So far we have treated the cases in which 1) revenue is recognized at the same time as the associated cash receipt; 2) revenue is recognized prior to the associated receipt of cash.

We shall now take up the case in which 3) revenue is recognized subsequent to or after the associated receipt of cash.

When a customer pays a business in advance for a service or product, the business has an obligation to render the services or deliver the product. This obligation appears on the balance sheet as a liability under the title “Deferred revenue.”

Thus when a business receives cash in advance towards a sale, it records an increase in cash and a corresponding increase in the liability, deferred revenue.

Suppose, Quilts &Shams Enterprise receives an advance of $500 from a retailer, for the delivery of bed linens, sheet sets, luxury quilts, pillow shams, bed in a bag set, bed skirts, dust ruffles, blankets, etc. The entries that should be made on the accounts of Quilt & Shams Enterprise: Cash increases, $500; deferred revenue increases, $500.

Later, when the goods are delivered, Quilts & Shams Enterprise will recognize the $500 revenue and will record a corresponding decrease in liability, deferred revenue. The two entries that should be made when the goods are delivered: Revenue or Owner’s Equity increases, $500; Deferred revenue, decreases, $500.

To summarize, revenue are recognized at the time goods or services are delivered. An accountant may recognize revenue prior to the related cash receipt by setting up an asset entitled “Accounts receivable.” Or, the accountant may recognize revenue subsequent to the related cash receipt by setting up a liability entitled “Deferred revenue.”


PureComfortLinens.com, the ecommerce outlet of Vicera Enterprises, Inc., a duly registered corporation, offers a wide variety of high quality bedding and accessories for every bedroom in your house. It carries simple and colorful linens, stylish bedspreads, conventional comforters with self corded edge finish, etc., balmy pillows, beautiful pillow cases and other bed accouterments. We have been providing consumers with durability and comfort at reasonable prices.

Quilts &Shams Enterprise, Before and After Accounting Period Expenditure - How to Measure Business Expenses

An expense is defined as a decrease in owner’s equity resulting from the operations of the business. To repeat, to give rise to an expense, a transaction must (1) cause a decrease in the owner’s equity and (2) result from operations of the business.

Quilt & Shams Enterprise acquires an asset and pays for it by disbursing cash, by incurring a liability, or by exchanging another asset. The acquisition of an asset does not give rise to an expense because it does not decrease the owner’s equity.

The acquisition of an asset does not give rise to an expense. Such an acquisition is called expenditure. However, the delivery of quilt and shams to a customer costing $200 in gasoline as a result of a sale gives rise to an expense, whereas the purchase of that inventory is expenditure.

Assets are purchased because they are expected to be useful to the operations of the business, an expense is incurred to whatever extent the asset is consumed. Thus an asset gives rise to expenditure when acquired, and to an expense as it is consumed.

Quilts & Shams Enterprise purchases a two-year supply of fuel oil on December 15, 2007, paying $1,000. No fuel oil is used in 2007. Half of it is used in 2008, and half in 2009. When shall there be an expenditure and an expense? There will be expenditure in 2007 and an expense in 2008 and 2009.

Between the time of acquisition and the time of consumption, the resources of a business are assets. Thus the disbursement of funds to purchase fuel oil is termed expenditure; the fuel oil are assets until consumed; when consumed they give rise to an expense.

In the transaction above, the balance sheet item for fuel oil will show the following amounts in the years 2007-2009: As of December 31, 2007. . $1,000; as of December 31, 2008. . $500; as of December 31, 2009. . $0.

To continue, the item “fuel oil expense” on the income statements of Quilts & Shams Enterprise during 2007-2009 will be as follows: For the year 2007. . $0; for the year 2008. . $500; for the year 2009. . $500.

Over the life of the business, most expenditure become expenses, but in a short period of time, there is no necessary correspondence between expenditures and expenses.

A prime example of an asset that becomes an expense when it is used is Quilts & Shams Enterprise’s finished products in a company’s merchandise inventory. When the merchandise is sold, the cost at which it has been carried in inventory is added to the expense category, cost of goods sold, and the inventory account decreases by the same amount.

Quilts & Shams Enterprise produces part or its entire inventory. In such a company, the creation of inventory adds to the asset amount of the business. Between the time of manufacture and sale of a product, manufacturing costs such as wages of production personnel become part of the cost of the product manufactured, and remain as an asset, merchandise inventory, until the product is sold.

For example, if $10 in labor costs is required in order to manufacture a quilt whose material cost is $15, this quilt will be included in the balance sheet inventory item at a cost of $15 until it is sold.

Services and other intangibles purchased prior to the period during which their benefits are received are treated as assets until they are consumed. Insurance protection, prepaid rentals, and prepaid taxes are examples. These items appear as “Prepaid expenses” on the balance sheet.

Quilts & Shams Enterprises purchases a two-year insurance policy on December 31, 2008 for $6,000. The effect of this transaction will show a decrease in cash and an increase in the asset, prepaid expense.

During 2009, the enterprise incurs $3,000 of insurance expense. There is an increase in insurance expense and a decrease in prepaid expenses. A part of the asset is transferred to the expense account after the one year insurance coverage has expired.

Factory buildings, production machinery, etc., which normally have a useful life of several years are called fixed assets. These are also converted into expenses as they are used up.

In the case of fixed assets, it is necessary to estimate the useful life of the asset, and to charge off portions of the cost to expense account to some predetermined plan. This process, which is called depreciation would not normally apply to inventory and would normally apply to a factory building.

So far we have discussed expenditure of Quilts & Shams Enterprise which is made before the accounting period during which the relevant expense is recognized. We discovered that the time at which the expenditure is made does not affect the time at which the expense is recognized, and that the expenditure is treated as an asset until the expense is recognized.

Sometimes the expenditure is made after the accounting period in which the expense is recognized. For example, wages and salaries that are earned in 2009 but paid in 2010 will be recognized in 2009.

When an expense is recognized in an accounting period prior to the relevant expenditures, as in the case of wages earned in 2009 but paid in 2010, the obligation to pay for the goods or services received is shown as a liability until expenditure or cash outlay occurs.

An expense incurred prior to expenditure is added to the expenses of the income statement even though the relevant expenditure has not yet occurred. Another word for added is accrued. For this reason an expense incurred prior to its related expenditure gives rise to a liability entitled “Accrued expense” on the balance sheet until the expenditure is made.

In 2009 an employee earns $5000 that will be paid to him until 2010. To record the effects of this transaction in 2009, we must enter an increase in wages expense and a corresponding increase in the liability, accrued expenses.

In 2010 when the enterprise pays the employee it will record a decrease in cash and a corresponding decrease in the liability, accrued expenses.

I have discussed the case where the cash disbursement precedes the incurring of expenses and the case where it follows the expense. Of course when expenditure falls in the same accounting period as the expense, no problems arise, we merely record the appropriate decrease in cash and increase in expense.

PureComfortLinens.com, the ecommerce outlet of Vicera Enterprises, Inc., a duly registered corporation, offers a wide variety of high quality bedding and accessories for every bedroom in your house. It carries simple and colorful linens, stylish bedspreads, conventional comforters with self corded edge finish, etc., balmy pillows, beautiful pillow cases and other bed accouterments. We have been providing consumers with durability and comfort at reasonable prices.

The Seven Fundamental Accounting Principles

In any language there are some rules or principles that are definite and some others are indefinite. The latter are a matter of opinion or style. Accountants have different opinions, just are grammarians have different opinions. Accounting principles evolve to form the underlying basis for good accounting practice. In this article, I will try to describe the elements of good accounting practice, the fundamental accounting concepts.

Here is a list of the seven fundamental accounting concepts. What is the meaning of each?
(1) Dual Aspect Concept
(2) Money Measurement Concept
(3) Business Entity Concept
(4) Going-concern Concept
(5) Cost Concept
(6) Accrual Concept
(7) Realization Concept

Dual Aspect Concept

The fact that the total assets of a company always equal the total equities underlies what is called the dual aspect concept. Obviously, the two aspects that this concept refers to are assets and equities. The concept states that these two aspects are always equal to each other.

The dual aspect concept is the first of the seven fundamental accounting concepts. The equation that states the dual aspect concept: assets = equities or equities = liabilities + owners’ equities, therefore, another form of the dual aspect principle is: Assets = liabilities + owners’ equities.

Money Measurement Concept

Accounting records show only facts that can be expressed in monetary terms. By reducing disparate facts to monetary terms we can deal with them arithmetically.

In adding together homogenous names as different cars, bed linens, supplies, shoes, etc., it is necessary to express them in homogenous unit. For this reason, it is necessary that each of the items enumerated is measured in monetary terms or in dollars.

The fact that a company has a lot of money or heavily in debt is a fact that could be determined by reading a balance of a company.

Business Entity Concept

Accounts are kept for business entities as distinguished from the person(s) associated with those entities.

For example, Mr. Smith as owner of Affordable Nursery and Kids Bedding Company withdraws $1,000 from the business. In preparing financial accounts for the said company we should record the effect of this transaction on the business. Mr. Smith exchanges $1,000 of owners’ equity for $1,000 in cash. Mr. Smith is just as well off after this transaction. What about the business? It now has $1,000 less in asset.

A business may be organized under any of several legal forms, such as a corporation, partnership, or unincorporated proprietorship. This concept applies regardless of the legal status.

Going-concern Concept

The accounting principle according to which we normally assume that a business will continue for an indefinite period and is not about to be sold is called the going-concern concept. Properties are recognized at cost without regard to the change in their market values in succeeding periods because the business is expected to continue operating indefinitely.

For example, a luxury bed ensemble could be purchased at $150 in another store, but the business purchased it at $155. It should be recorded at $155 which is the amount exchanged at the time the asset was acquired.

Cost Concept

Assets are ordinarily entered on the accounting records at the price paid to acquire them. The going concern concept and the difficulty in determining market value objectively require us to value assets at their cost. Evidently, the going concern concept is one reason for the cost concept.

Accrual Concept

Under this concept, income is measured as the difference between revenues and expenses rather than the difference between cash receipts and disbursements. Most of the difficult and controversial problems in accounting arise in measuring the revenue and expenses for a specified period of time i.e., in applying the accrual concept.


For example, Beach Towels Market borrowed $15,000 from a bank. As a result of this transaction, cash increased, the owners’ equity did not change. Therefore the receipt of cash was not associated with revenue.
On January 4, Beach Towels Market purchased $20,000 worth of inventory, paying cash. After this transaction, cash decreased, owners’ equity did not change. Thus the disbursement on January 4 was not associated with an expense.

On January 8, merchandise costing $6,000 was sold for $9,000, the customer agreeing to pay within 30 days. This transaction resulted in no change in cash. Revenue was $9,000. This revenue was not associated with an increase in cash at the same time.

Evidently, revenues and expenses are not always accompanied at the same time by increases or decreases of an equal amount of cash. Increases or decreases in cash are changes in an asset. Revenues or expenses are changes in equity. An increase or decrease in cash is not always associated with an equal amount of revenue or expense.

Net income is measured by the difference between revenues and expenses rather than the difference between cash increases and decreases. This principle is called the accrual concept.

Realization Concept

Revenue is recognized at the time that it is realized – that is, when goods are shipped or services are rendered to the customer. This concept tells us when to recognize revenue.

For example, Bed Linens Company manufactures quality bed linens in June. It receives an order from Quilts & Shams Retailer for sheet sets in July. Bed Linens Company ships the sheet sets in July. Quilt & Shams Retailer pays the bill in August and sold the sheet sets in September. Bed Linens Company would recognize revenue in July.
Revenue is realized when a sale is consummated through the delivery of goods or services. Because of this, the word “sales” is sometimes used as a synonym for revenue, and sometimes you will see the phrase “sales revenue.”


PureComfortLinens.com, the ecommerce outlet of Vicera Enterprises, Inc., a duly registered corporation, offers a wide variety of high quality bedding and accessories for every bedroom in your house. It carries simple and colorful linens, stylish bedspreads, conventional comforters with self corded edge finish, etc., balmy pillows, beautiful pillow cases and other bed accouterments. We have been providing consumers with durability and comfort at reasonable prices.