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    Accounting Concepts and Conventions

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    Welcome 1995
    Accounting concepts provide the basic assumptions and principles that guide accounting practices. The key concepts include: 1) The business entity concept treats a business as a separate entity, distinct from its owners. Transactions are recorded from the business's perspective. 2) The going concern concept assumes a business will continue operating indefinitely into the future. 3) Only transactions involving monetary values are recorded under the money measurement concept. Accounting periods, matching revenues and expenses, asset valuation at cost, the dual aspect of transactions, and requiring objective evidence for all entries provide consistency and reliability in financial reporting.

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    Accounting Concepts and Conventions

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    Welcome 1995
    121 views2 pages
    Accounting concepts provide the basic assumptions and principles that guide accounting practices. The key concepts include: 1) The business entity concept treats a business as a separate entity, distinct from its owners. Transactions are recorded from the business's perspective. 2) The going concern concept assumes a business will continue operating indefinitely into the future. 3) Only transactions involving monetary values are recorded under the money measurement concept. Accounting periods, matching revenues and expenses, asset valuation at cost, the dual aspect of transactions, and requiring objective evidence for all entries provide consistency and reliability in financial reporting.

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    ACCOUNTING CONCEPTS AND CONVENTIONS

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    Accounting concepts provide the basic assumptions and principles that guide accounting practices. The key concepts include: 1) The business entity concept treats a business as a separate entity, distinct from its owners. Transactions are recorded from the business's perspective. 2) The going concern concept assumes a business will continue operating indefinitely into the future. 3) Only transactions involving monetary values are recorded under the money measurement concept. Accounting periods, matching revenues and expenses, asset valuation at cost, the dual aspect of transactions, and requiring objective evidence for all entries provide consistency and reliability in financial reporting.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    121 views2 pages

    Accounting Concepts and Conventions

    Uploaded by

    Welcome 1995
    Accounting concepts provide the basic assumptions and principles that guide accounting practices. The key concepts include: 1) The business entity concept treats a business as a separate entity, distinct from its owners. Transactions are recorded from the business's perspective. 2) The going concern concept assumes a business will continue operating indefinitely into the future. 3) Only transactions involving monetary values are recorded under the money measurement concept. Accounting periods, matching revenues and expenses, asset valuation at cost, the dual aspect of transactions, and requiring objective evidence for all entries provide consistency and reliability in financial reporting.

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    ACCOUNTING CONCEPTS AND CONVENTIONS

    Explain the accounting concepts.

    Accounting is based on certain basic assumptions or conditions. Such assumptions or conditions


    are known as accounting concepts. Some of the important concepts are explained below:

    1. Business Entity Concept: For accounting, the business is considered as a separate unit
    and distinguished from the persons who own or control it. Therefore, all business
    transactions are recorded from point of view of the business and not from the point of
    view of the proprietor though he own it.
    2. Going Concern Concept: It is based on the assumption that the business will continue
    for a long time. In other words, the transactions are recorded on the assumption that the
    business will continue to exist in the future.
    3. Money Measurement Concept: In accounting, only those transactions which can be
    expressed in terms of money are recorded. It is known as money measurement concept.
    4. Cost Concept: In accounting, the assets are recorded at their actual cost of acquisition
    and this cost will be the basis for all subsequent accounting for the assets.
    5. Dual Aspect Concept: Each transaction has two aspects is the basic accounting
    principle. One is receiving of a benefit another is giving of that benefit. This dual aspect
    concept is the basis for double entry system of book keeping. This basic rule of this
    system “For every debit there must be a corresponding credit” clearly indicates this
    concept.
    6. Accounting Period Concept: The life time of a business is considered as long as
    indefinite. But it is essential to study the results of the business at appropriate intervals
    for taking corrective actions as and when necessary. Therefore, in accounting, the life
    time of the business is divided into a number of accounting years to known its
    profitability and financial position.
    7. Matching Concept: The matching of revenues with costs of a period is necessary to
    ascertain the profits earned during that period. This matching of periodical costs with
    revenues is known as matching concept.
    8. Realisation Concept: The transactions which are likely to arise are not recorded in the
    accounts since accounting is a historical record of transactions. In other words, no sales
    or income will be recorded unless it is realised in cash or the other party has promised to
    pay for it.
    9. Accrual Concept: The accrual concept is the basis for mercantile system of accounting.
    While finalising accounts, all expenses and losses pertaining to the accounting period
    must be listed out. Any outstanding expenses and prepaid expenses must be recorded.
    Similarly, all incomes associated with the period should be included. Any accrued
    incomes and incomes received in advance must be appropriately recorded. The accrual
    concept ensures that the profit or loss shown is on the basis of full facts relating to all
    expenses and incomes.
    10. Objective Evidence Concept: All accounting entries must be based on objective
    evidence. ‘Objective’ refers to verifiability, reliability and absence of bias. No transaction
    must be recorded in the books of accounts without verifiable documentary evidence.
    Objective evidence concept facilitates auditing of accounts and eliminates unauthorized
    entries in the books of accounts, improving their reliability. Management decisions based
    on such accounts are likely to be more successful.

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