Accounting Principles

1. Business entity concept

2. Going concern concept
3. Accounting period concept
4. Money measurement concept
5. Matching concept
6. Realisation concept
7. Accrual concept
8. Cost concept
9. Dual aspect concept
10. Objective evidence concept
 Business entity concept

The entity is separate and distinct from owners and

the entity is liable to the owner.
Example: in a limited liability company, the enterprise
is liable to the owner.
Distinct legal entity

Separate
existence
Entity

Limited
liability
 Going concern concept

Business entity has life of infinite duration, unless

facts are known that indicate otherwise.

The basis of valuation of resources is influenced

more by their future utility to the business entity,
rather than their current market valuation.
 Periodic concept has been developed from going
concern concept. Infinite life of the business is
segmented into different periods called accounting
period. Profit are measured on accounting period
based on realized gains.

Money measurement concept: it is used as a

mean to convert quantity and quality into a common
denominator i.e. in terms of money.
Matching concept: This is useful in determining the
profitability of business operations during a
particular period. It means, determining profits after
charging the expenses of a period with the revenues
earned in the same period.
Realization principle: Realization is technically
understood as the process of converting non cash
resources to and rights to money. Revenue
recognition is the process of formally recording
revenue in an accounting period.

Accrual principle: net income arises from events that

change owners equity.
 Accounting conventions
• Convention of consistency
• Convention of full disclosure
• Convention of conservatism
• Convention of materiality
 Accounting standard

The accounting standards suggests the rules for recognition,

measurement and treatment, presentation and disclosure of
accounting transactions in the financial statements of an
organization.
 Accounting Standards (ASs)
   AS 1 Disclosure of Accounting Policies
   AS 2 Valuation of Inventories
   AS 3 Cash Flow Statements
   AS 4 Contingencies and Events
Occurring after the Balance
Sheet Date
   AS 5 Net Profit or Loss for the period,
Prior Period Items and Changes in
Accounting Policies
   AS 6 Depreciation Accounting
AS 7 Construction Contracts (revised 2002)
AS 8 Accounting for Research and Development
AS 9 Revenue Recognition
AS 10 Accounting for Fixed Assets
AS 11 The Effects of Changes in Foreign Exchange Rates
(revised 2003),
AS 12 Accounting for Government Grants
AS 13 Accounting for Investments
AS 14 Accounting for Amalgamations
AS 15 (revised 2005) Employee Benefits
AS 15 (issued 1995)Accounting for Retirement Benefits in
the Financial Statement of Employers
AS 16 Borrowing Costs
AS 17 Segment Reporting
AS 18, Related Party Disclosures
AS 19 Leases
AS 20 Earnings Per Share
AS 21 Consolidated Financial Statements
AS 22 Accounting for Taxes on Income.
AS 23 Accounting for Investments in Associates
in Consolidated Financial Statements
AS 24 Discontinuing Operations
AS 25 Interim Financial Reporting
AS 26 Intangible Assets
AS 27 Financial Reporting of Interests in Joint
Ventures
AS 28 Impairment of Assets
AS 29 Provisions, Contingent` Liabilities and
Contingent Assets
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