Neil Patel 40068068 Unit 6 P1
P1: describe how the legislation & accounting concepts affect an organisation’s
accounting policies
Legislation/Concept How it affects an organisation’s accounting policies?
Partnership Act 1890 This is where a settlement is placed between a
partnership for example Waitrose Partnership who have
to come to before establishing their business. This
legislation is when each partner is given an in depth
formality of what the partnership requires their employees
to do. Referring to the partnership agreement all profits
and losses have to be divided equally but this can be
overruled as the partners can agree to a different ratio of
division and have it legally declared through their own
partnership agreement. This act is another document
which contains important documentation. The important
documents that have to be in this Act are the name and
position of all the partners in the organisations, ratio of
profit and loss sharing, the capital that each partner has
brought into the business, power of each partner. It is
important to know what power each partner has in the
business, because some might not be able to do activities
like their peers.
Business entity In accounting we treat a business or an organisation and
concept its owners as two separately identifiable parties. This
concept is called business entity concept. It means that
personal transactions of owners are treated separately
from those of the business.
The business entity concept can be useful in the sense
that it helps in assessing the financial position of each
and every business separately on a particular date.
Financial accounting is based on the premise that the
transactions and balances of a business entity are to be
accounted for separately from its owners. The business
entity is therefore considered to be distinct from its
owners for the purpose of accounting.
Consistency concept
The concept of consistency means that accounting
methods once adopted must be applied consistently in
future. Also same methods and techniques must be used
for similar situations. Consistency concept is important
because of the need for comparability, which then
enables investors and other users of financial statements
to swiftly compare the financial statements of a business.
It implies that a business must refrain from changing its
accounting policy unless on reasonable grounds. If for
any valid reasons the accounting policy is changed, a
P1: describe how the legislation & accounting concepts affect an organisation’s
accounting policies
Legislation/Concept How it affects an organisation’s accounting policies?
Partnership Act 1890 This is where a settlement is placed between a
partnership for example Waitrose Partnership who have
to come to before establishing their business. This
legislation is when each partner is given an in depth
formality of what the partnership requires their employees
to do. Referring to the partnership agreement all profits
and losses have to be divided equally but this can be
overruled as the partners can agree to a different ratio of
division and have it legally declared through their own
partnership agreement. This act is another document
which contains important documentation. The important
documents that have to be in this Act are the name and
position of all the partners in the organisations, ratio of
profit and loss sharing, the capital that each partner has
brought into the business, power of each partner. It is
important to know what power each partner has in the
business, because some might not be able to do activities
like their peers.
Business entity In accounting we treat a business or an organisation and
concept its owners as two separately identifiable parties. This
concept is called business entity concept. It means that
personal transactions of owners are treated separately
from those of the business.
The business entity concept can be useful in the sense
that it helps in assessing the financial position of each
and every business separately on a particular date.
Financial accounting is based on the premise that the
transactions and balances of a business entity are to be
accounted for separately from its owners. The business
entity is therefore considered to be distinct from its
owners for the purpose of accounting.
Consistency concept
The concept of consistency means that accounting
methods once adopted must be applied consistently in
future. Also same methods and techniques must be used
for similar situations. Consistency concept is important
because of the need for comparability, which then
enables investors and other users of financial statements
to swiftly compare the financial statements of a business.
It implies that a business must refrain from changing its
accounting policy unless on reasonable grounds. If for
any valid reasons the accounting policy is changed, a
