APPLICATION OF CONCEPTS &

CONVENTIONS IN PREPARATION OF
FINANCIAL STATEMENTS

Submitted by:

Abhishek Pore – 03

Ankita Mendon – 20

Arpita Shah – 22

Ashish Chaplot – 23

Dassler Coutinho – 32

A Report submitted to MET Institute in partial fulfillment of the requirement for

the award of eMBA for the year 2010-12

Under the guidance of:

Prof L. N. Chopde
 Met Institute of Management

CERTIFICATE

This is to certify that project titled Application of concepts and conventions in

preparation of financial statements – A case study of L&T Co. is based on original
study conducted by:

Abhishek Pore – 03

Ankita Mendon – 20

Arpita Shah – 22

Ashish Chaplot – 23

Dassler Coutinho – 32

Under the guidance and this had not formed a basis for the award of any other
degree of MET Institute.

Place: - Mumbai
Date: - 30th October, 2010 Faculty Signature

MET Institute of Management

 PREFACE

The topic chosen by us is Application of concepts and conventions in

preparation of financial statements – A case study of L&T Co.

The objective of the study is to get well-versed with the accounting concepts &
conventions. Concepts & conventions would only be understood if one studies a
balance sheet & annual report of a company.

The scope of the study includes studying the balance sheet & annual report of
Larsen & Toubro Ltd. The balance sheet was studied of the year 2009-10. It
provided an in-depth knowledge and helped us in understanding the concepts &
conventions better.

Data was collected from some reference books & also via the internet. Websites
were referred to study the annual report. Concepts were studied from Prof.
Chopde’s notes and also from Fundamentals of Accounting – The Institute of
Chartered Accountants of India.
 ACKNOWLEDGEMENT

First and foremost, we would like to thank Prof. L. N. Chopde for the valuable
guidance and advice. He inspired us greatly to work on this project. His willingness
to motivate us contributed tremendously to our project. We also would like to
thank him for showing us some example that related to the topic of our project.

Besides, we would like to thank MET Institute of Management for providing us

with a good environment and facilities to complete this project.

Finally, an honorable mention goes to our families and friends for their
understandings and supports on us in completing this project. Without helps of
the particular that mentioned above, we would face many difficulties while doing
this project.
 EXECUTIVE SUMMARY

The project is based on Accounting concepts & conventions used in preparation of

financial statements. We have selected Larsen & Toubro Ltd. as our company of
study. We have studied the annual report of the company to understand the
concepts & conventions followed by the company. After every concept &
convention we have given pointers which will explain the application of that
particular concept or convention in preparation of financial statement.

The project helped us to study the concepts & conventions. Application through
using a Balance Sheet has enabled us to understand the concepts & conventions
properly.
 CONTENTS

Sr. No. Topic Page No.

1 Introduction 1
2 Vision 2
3 Entity Concept 3
4 Monetary Concept 4
5 Going Concern Concept 5
6 Cost Concept 8
7 Realisation Concept 9
8 Matching Concept 12
9 Dual Aspect Concept 14
10 Convention of Consistency 16
11 Convention of Conservatism 18
12 Convention of Materiality 20
13 Convention of Disclosure 22
14 Bibliography 23