ACCOUNTING CONCEPTS AND

CONVENTIONS

Company Chosen: RELIANCE INDUSTRIES LIMITED

Done By: Siva Priyanka (2323665)

Shriyaa Paravasthu (2323662)
Kavya Chhapwale(2323638)

1. ITEM: Short-term borrowings

CONCEPT: Matching principle. The matching principle states that it is necessary to

match the revenue earned during the period with the expenses of that period to
determine the correct profit and loss for that accounting period.

REASONING: As short-term borrowings is a current liability; the matching principle

implies that a firm should adjust its short-term debt financing until the amount of the
firm's current liabilities equals the amount of its current assets

2. ITEM: Tangible assets

CONCEPT: Cost principle. An asset is recorded in a book of accounts at the price

paid to acquire it and the cost is the basis for all subsequent accounting of assets.

REASONING: The cost principle is that companies should value large, fixed assets,
like real estate and machinery, based on what the company paid for them at the time
of acquisition, rather than at their current fair market value.

3. ITEM: Non-current investments

CONCEPT: Matching principle. The matching principle states that it is necessary to

match the revenue earned during the period with the expenses of that period to
determine the correct profit and loss for that accounting period.
 REASONING: Because a non-current asset generates revenues period after period,
some of its cost should be expensed in, or matched to, those same periods. The
amount of expense recognised in each period is known as depreciation expense.

4. ITEM: [Non-Current Liabilities] Deferred Tax Liabilities (Net)

CONCEPT: The Accounting Period Principle; is an accounting principle that acts as

an accounting guideline for the firm to organize its activities into specific time
periods. This principle is used to prepare and present regular financial statements to
the relevant stakeholders to compare the past performance of the company to the
present.

REASONING: The Deferred Tax Liabilities [Net] fall under this principle as they are
subject to timing differences between the recognition of income and expenses for
financial reporting and tax purposes.

5. ITEM: [Shareholder’s Funds] Equity Share Capital

CONCEPT: Materiality Principle; This principle states that any item that can
significantly impact the financial decisions of stakeholders must be reported
separately.

REASONING: The materiality principle can be applied to the case of Equity Share
Capital because the amount of share capital issued could be of interest to various
stakeholders such as creditors, shareholders, and potential investors of Reliance along
with the regulatory authorities of India.

6. ITEM: [Contingent Liabilities, commitments] Contingent Liabilities

CONCEPT: Full Disclosure Principle; This accounting principle refers to the

requirement of the inclusion of all necessary information to understand the company’s
financial position. This principle ensures transparency in the financial statements of
companies.

REASONING: This principle applies to contingent liabilities as Reliance must

disclose the potential liabilities even if the occurrence and expense are uncertain. This
is because they have a significant impact on the financial situation of Reliance.

7. ITEM: Other Non-Current Assets

CONCEPT: Money Measurement principle. Transactions and events that can be

measured in monetary terms are recorded in the books of accounts of the enterprise.
 REASONING: This principle applies to Other non-current assets as they are
expressed in terms of Indian Rupee (00s/000s of crores) in the following balance
sheet released by Reliance.

8. ITEM: Capital Work in Progress

CONCEPT: Going Concern Concept. This principle assumes that a business has no
intention of shutting down and will continue its operations for the foreseeable future.

REASONING: Capital work in progress refers to the non-current assets that are in the
process of building or construction such as building under construction. The business
is undergoing these investments because it intends on ruining the business for the
foreseeable future which is going concerning concept.

9. ITEM: Long-Term Provisions

CONCEPT: Prudence Principle. Prudence's principle takes into consideration all

possible losses but not possible profits. Under this principle, the company should not
overestimate its assets and undervalues its liabilities.

REASONING: Long-term provisions refers to the funds kept aside by a company to

deal with any potential losses that may occur. This follows from the prudence
principle which considers all losses but not profits.

10. ITEM: Inventories

CONCEPT: Going Concern Concept. According to this principle, a business should

assume that it will continue for the foreseeable period. There is no intention for the
business to shut down.

REASONING: Inventory refers to raw materials that will be used in the process of
production of goods or services. It also refers to finished goods that are ready for sale.
This is based on the principle of going concern according to which it is assumed that
the business will continue operations for the foreseeable future, thus the inventory
will become sales for the business in the future.

BIBLIOGRAPHY:

Reliance Industries Ltd. “Reliance Industries Balance Sheet, Reliance Industries Financial Statement
& Accounts.” Moneycontrol, https://www.moneycontrol.com/financials/relianceindustries/balance-
sheetVI/RI. Accessed 30 July 2023.
​(Reliance Industries Ltd.)