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Accounting Principles, Concepts and Conventions

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mckien9
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17 views

Accounting Principles, Concepts and Conventions

Uploaded by

mckien9
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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ACCOUNTING

PRINCIPLES,
CONCEPTS AND
CONVENTIONS
ACCOUNTING
PRINCIPLES/CONCEPTS:

• The term ‘concept’ is used to


denote accounting precepts, i.e.,
basic assumptions or conditions
upon which the accounting
structure is based.
ACCOUNTING
PRINCIPLES/CONCEPTS
(CON’T):
• Business Entity Concept: this concept
implies that the business unit is separate
and distinct from the persons who
provide the required capital to it.
• Money Measurement Concept: In
accounting all events or transactions are
measured and recorded in terms of
money.
ACCOUNTING
PRINCIPLES/CONCEPTS
(CON’T):
• Going Concern Concept: The events or
transactions are recorded assuming that
the business will exist for the foreseeable
future (a long period of time).
• Periodicity Concept: The life of the
business is segmented into different
periods and accordingly the result of each
period is ascertained.
ACCOUNTING
PRINCIPLES/CONCEPTS
(CON’T):
• Dual Aspect Concept: Every event or
transaction has a two-fold aspect, Viz.,
• 1. Giving certain benefits; and
• 2. Receiving certain benefits;

• Historical Cost Concept: The event or


transactions are recorded in the books of
account with the respective amounts
involved.
ACCOUNTING
PRINCIPLES/CONCEPTS
(CON’T):
• Matching Concept: provides that all
costs which are associated to a particular
period should be compared with the
revenues associated to the same period to
obtain the net income of the business.
• Realization Concept: This concept
assumes or recognizes revenue when a
sale is made and or the revenue is earned.
ACCOUNTING
PRINCIPLES/CONCEPTS
(CON’T):
• Accrual Concept: According to this
concept the revenue is recognized on
its realization and not on its actual
receipt of cash. Similarly the costs are
recognized when they are incurred and
not when payment is made.
ACCOUNTING CONVENTIONS:
Consistency: Refers to the state of
accounting rules, concepts, principles,
practices and conventions being observed
and applied constantly, i.e., from one year
to another there should not be any
change.
Disclosure: This stresses the importance
of providing accurate, full and reliable
information and data in the financial
statements which is of material interest to
the users and readers of such statements.
ACCOUNTING CONVENTIONS
(CON”T):
• Conservatism: This convention follows
the policy of caution or playing it safe.
It takes into account all possible losses
but not all possible profits or gains.

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