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    Principles of Accounting

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    palashndc
    The document discusses the key accounting concepts used in O'Level Principles of Accounting. There are two types of concepts: fundamental concepts and underlying concepts. The five fundamental concepts are the going concern concept, consistency concept, prudence concept, matching concept, and materiality concept. The underlying concepts are historical cost concept, money measurement concept, business entity concept, dual aspect concept, and time interval concept. Accounting concepts provide the basic framework and principles for recording accounting transactions and preparing financial statements.

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    Principles of Accounting

    Uploaded by

    palashndc
    195 views3 pages
    The document discusses the key accounting concepts used in O'Level Principles of Accounting. There are two types of concepts: fundamental concepts and underlying concepts. The five fundamental concepts are the going concern concept, consistency concept, prudence concept, matching concept, and materiality concept. The underlying concepts are historical cost concept, money measurement concept, business entity concept, dual aspect concept, and time interval concept. Accounting concepts provide the basic framework and principles for recording accounting transactions and preparing financial statements.

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    Principles Of Accounting

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    The document discusses the key accounting concepts used in O'Level Principles of Accounting. There are two types of concepts: fundamental concepts and underlying concepts. The five fundamental concepts are the going concern concept, consistency concept, prudence concept, matching concept, and materiality concept. The underlying concepts are historical cost concept, money measurement concept, business entity concept, dual aspect concept, and time interval concept. Accounting concepts provide the basic framework and principles for recording accounting transactions and preparing financial statements.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    195 views3 pages

    Principles of Accounting

    Uploaded by

    palashndc
    The document discusses the key accounting concepts used in O'Level Principles of Accounting. There are two types of concepts: fundamental concepts and underlying concepts. The five fundamental concepts are the going concern concept, consistency concept, prudence concept, matching concept, and materiality concept. The underlying concepts are historical cost concept, money measurement concept, business entity concept, dual aspect concept, and time interval concept. Accounting concepts provide the basic framework and principles for recording accounting transactions and preparing financial statements.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    Principles Of Accounting O'Level: Accounting Concepts

    Principles Of Accounting O'Level


    Accounting Concepts
    THERE ARE 2 TYPES OF ACCOUNTING CONCEPTS:

    1. Fundamental accounting concepts


    2. Underlying accounting concepts.

    Fundamental Accounting Concepts


    There are five accounting concepts:
    1. Going Concern Concept
    The going concern concept implies that the business will continue to operate in the
    foreseeable future. A business is a going concern if it has no intention to discontinue its
    activities. Accounts are usually prepared under the going concern concept. In case a
    business is not a going concern, assets will be shown at the price at which they may be
    sold when the business closes down.

    2. Consistency Concept
    A business must choose a method to record its transactions which will show a more
    realistic view of the business. If a business chooses one method to record one
    transaction, the consistency concepts states that it should continue to use this method
    in the subsequent years unless the method does not show a realistic view or an
    another valid reason is given.

    3. Prudence Concept
    The prudence concepts states that all losses should be recorded in the books as soon
    as they are recognized, but gains and profits should not be recorded unless they are
    realized, that is, the business should get the profit or gain in reality. The aim of the
    prudence concept is to prevent profits from being overstated.

    4. Matching Concept (Accrual Concept)


    The matching concept states that net profit is the difference between revenue and
    expenditure incurred. That is;
    NET PROFIT = REVENUE - EXPENDITURE

    The matching concept also states that if an expense is incurred in a financial year, then
    the expense should be included in the final accounts of that year itself, whether the
    expense has been paid or not.

    5. Materiality Concept
    The materiality concept states that only items which are material will be recorded in the
    books. There is no need for absolute precision on the books. For instance, a pocket
    calculator costing only $8 will not be considered as a non-current asset, although its
    useful life is 5 years.

    Underlying Accounting Concepts


    1. Historical Cost Concept
    Under the historical cost concept, the assets are shown at their cost price.

    2. Money Measurement Concept

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    Principles Of Accounting O'Level: Accounting Concepts
    Accounting information consists of only those transaction which have a monetary value
    to which most people will agree. The limitation of this concept is that accounting can
    never provide each and every information of the business. For example, it cannot show
    whether the business has problem with the workforce.

    3. Business Entity Concept


    This concept states that the business has separate existence from that of the owner.

    4. Dual Aspect Concept


    The dual aspect concepts states that every transactions should have two aspects, one
    debit and the other credit (Double entry system is applied).

    5. Time Interval Concept


    This concepts states that final accounts should be prepared at a regular time interval of
    one year.

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