ACCOUNTING PRINCIPLES,

CONCEPTS, CONVENTIONS,AND
ACCOUNTING EQUATION

Dr C SITHARAMAYYA
 ACCOUNTING PRINCIPLES
 Theory and procedure of accounting,
emerged out of current practices

 They serve as guidelines to select the best

practices among the available alternatives

 They help to establish standards for sound

accounting practices and procedures
Accounting principles contd..
 Such standards provide accurate reporting
on financial status of an enterprise

 Accounting principles are classified into:

1. Accounting Concepts &

2. Accounting conventions
 ACCOUNTING CONCEPTS
1. Business entity concept
2. Money measurement concept (No
emotional values)
3. Cost concept (only historical costs)
4. Going concern concept (depreciation, etc.)
5. Dual aspect concept (Dr & Cr)
6. Realisation concept (No expected values)
7. Accrual concept ( Receivable/payable etc.)
ACCOUNTING CONVENTIONS
1. Consistency

2. Disclosure

3. Conservatism

4. Materiality
 ACCOUNTING EQUATION
 All business transactions are given a dual
effect, i.e., debit and credit

 Since a business entity is treated as

separate from its owner, the resources in
the business (assets) should be equal to
its financial obligations (Share capital +
Liabilities)
Accounting equation contd..

Therefore, accounting equation will be:

Share capital + Liabilities = Assets

Or

Share capital = Assets - Liabilities

THANK YOU