Principles Of Accounts

Accounting Concepts
 Going concern concept
• What Is Going Concern?
• Going concern is an accounting term for a company that has the
resources needed to continue operating indefinitely until it provides
evidence to the contrary.
• This term also refers to a company's ability to make enough money to stay
afloat or to avoid bankruptcy.
 Separate entity principle
• What is separate entity concept?
• The separate entity concept states that we should always separately
record the transactions of a business and its owners.
• An owner cannot extend funds to a business without recording it as either
a loan or a stock purchase. Otherwise, undocumented cash appears in the
business.
 Prudence/conservatism concept
• What is the Prudence Concept?
• Under the prudence concept, do not overestimate the amount of
revenues recognized or underestimate the amount of expenses.
• Also, one should be conservative in recording the amount of assets, and
not underestimate liabilities. The result should be conservatively-stated
financial statements.
 Matching concept
• What is the matching concept?
• The matching concept is an accounting principle that requires the
identification and recording of expenses associated with revenue
earned and recognized during the same accounting period.
 Consistency concept
• What is the consistency concept?
• The concept of consistency means that accounting methods once
adopted must be applied consistently in future.
• Also same methods and techniques must be used for similar situations. It
implies that a business must refrain from changing its accounting policy
unless on reasonable grounds.