By: Bhawna Dhamija MBA 1 A Roll No.

: 25

.Accounting Concepts Accounting concepts may be defined as the basic assumptions or conditions upon which the science of accounting is based. Accounting Conventions These emerge out of accounting practices. Its object is to make accounting uniform. . adopted by various organization over a period of time. objective and understandable. Accounting concepts are certain rules of general application. They are basic to the subject of accounting and provide guidelines in selecting accounting methods in certain situations. These are derived out of usage and practices and do not have universal application. These include those customs and traditions which guide the accountants while preparing the accounting statements.

Guidelines based upon customs or usage Biasness in adoption.BASIS Nature ACCOUNTING CONCEPTS Accounting concepts are generally agreed principle followed by accountant. It has no uniform adoption. ACCOUNTING CONVENTIONS Accounting conventions have no general applicability. optional and provides several alternative practice. These are primarily used in recording. Use These are primarily used for preparing financial statements Conventions are not mandatory to be enforced by any regulating agency. Accounting concepts are made mandatory in a specific accounting standard enforced by a regulating agency. Mandatory by regulating agency . analyzing and communicating financial information of a business. classifying. It has uniform adoption. Established By Law Biasness No space for personal biasness in the adoption . These are flexible.

Money measurement concept…… Examples of accounting convention:  Convention of full disclosure. .. materiality….Examples of accounting concept:  Separate Entity Concept . To summarize . conservatism . accounting concepts are assumptions or fundamental proposition on which accounting depends and conventions are traditions or customs that guide in preparing accounting statements. consistency .

Revenue is measured according to accrual concept.Revenue is considered to be earned on its being realised. . How to measure revenue and expense?  Measurement of Revenue . . When to match?  Either at the end of the life of business or at the end of each year.What to match?  Expense is to be matched with revenue.

Period of recognition (expense being directly or indirectly associated with revenue of that period) .Determination of amount of expense (traditional approach and replacement approach ) .Measurement of Expense .

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