Business Entity Concept:
Data gathered in an accounting system relate to a specific business unit of entity. The business entity concept assumes that each business has anexistence separate from it’s owners, creditors, employees, customers, other interested partiesand other business.
Accounting to periodicity concept or assumption an entity’s life can bemeaningful subdivided into time periods (such month or years) for purposes of reporting theresults of its economic activities.
Going Concern Concept:
Unless strong evidence exists to the contrary, accountants assumethat the business entity will continue operations into the indefinite future. Accountants callthis assumption the going concern or continuity assumption.
Assets such as land, buildings, merchandise and equipment are typical of themany economic resources that will be used in producing revenue for the business. The prevailing account is that such assets should be used at their cost. When we say that an assetis shown in the balance sheet at its historical cost, we mean the original cost of the asset tothe business entity; this amount may be very different from the asset’s current market value.
Accounting that recognizes revenues and expenses as they occur, eventhough the cash receipt from the revenue or the cash disbursement related to the expense mayoccur before or after the event that causes revenue or expense recognition.
After accrual transaction when we receive or pay cash in form of revenue or expenses then we record it in our accounting book. It’s not a fact when the transaction hashappened but main thing is receiving or paying cash in this concept.
Conservatism in accounting relates to making judgments and estimates thatresult in lower profits and asset valuation estimates rather than higher profits and assetvaluation estimates. Accountants try to avoid wishful thinking estimate that could result inoverstating profits for a current period.
Double entry Concept:
Double entry concept means each entry has two sides one is debtor and the other is creditor. In this concept only those transactions are recorded which createffect on business directoty.