Accounting Concepts

Classification of Accounting Principles Accounting Concepts and Accounting Conventions

Accounting Concepts
Used to denote accounting assumptions and notions which are widely accepted and fundamental to the science of accounting. It is a general idea or a notion. It is an assumption, therefore it is not subject to any proof or evidence.

Accounting Concepts
Business entity concept
unit is treated as different, owners are treated as creditors, capital & drawing, income is the property of the business until it is distributed to owners.

Money measurement concept monetary transactions are being expressed, Dual aspect concept it is a fundamental concept, for every debit there is a
credit, dual effect, entry on both side
Assets = Liabilities + Capital Assets = Equities Assets = Liabilities + (s/h capital + NP NL if any) Assets are the resources owned by the business Liabilities represents the claims against the business

Going concern concept an enterprise is expected to continue operating

indefinitely in the future Current Assets & Fixed Assets, FA are depreciated for life time of assets, FL & CL, Expenses & O/S Expenses Int. Accounting Standard says if this concept is not followed, the fact should be disclosed in the financial statements along with suitable justification.

Accounting Concepts

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Accounting period concept 12 months period Cost concept acquisition price Matching concept Net income = Revenue Expenses, advt
expenses if it gives benefits for 4 years then divide for 4 years.

Accrual Concept

revenue is recognized when it is realized irrespective of whether cash is received or not. Expenses are recognized in the period in which they accrue, irrespective of whether cash is paid or not. placing an order, contract for sale and

Realization concept
cash payment

Accounting Conventions