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    CH.2.1 Accounting Concepts, Principles, Policies

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    Nicole Taboralouis
    Accounting concepts, principles, and policies provide the framework for preparing and presenting financial statements. The main concepts include business entity, going concern, money measurement, and accrual. Principles like income recognition, expense matching, and historical cost dictate how transactions are recorded. Accounting policies are the specific methods used by a company, such as depreciation calculations, inventory valuation, and asset valuation.

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    CH.2.1 Accounting Concepts, Principles, Policies

    Uploaded by

    Nicole Taboralouis
    167 views12 pages
    Accounting concepts, principles, and policies provide the framework for preparing and presenting financial statements. The main concepts include business entity, going concern, money measurement, and accrual. Principles like income recognition, expense matching, and historical cost dictate how transactions are recorded. Accounting policies are the specific methods used by a company, such as depreciation calculations, inventory valuation, and asset valuation.

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    Accounting concepts, principles, and policies provide the framework for preparing and presenting financial statements. The main concepts include business entity, going concern, money measurement, and accrual. Principles like income recognition, expense matching, and historical cost dictate how transactions are recorded. Accounting policies are the specific methods used by a company, such as depreciation calculations, inventory valuation, and asset valuation.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    167 views12 pages

    CH.2.1 Accounting Concepts, Principles, Policies

    Uploaded by

    Nicole Taboralouis
    Accounting concepts, principles, and policies provide the framework for preparing and presenting financial statements. The main concepts include business entity, going concern, money measurement, and accrual. Principles like income recognition, expense matching, and historical cost dictate how transactions are recorded. Accounting policies are the specific methods used by a company, such as depreciation calculations, inventory valuation, and asset valuation.

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    Accounting Concepts,

    Principles & Policies


    Accounting concepts, principle
    and policies
     Accounting Concepts are forms of assumptions or
    conditions applied in accounting.
     Accounting Principles are rules adopted by the
    accountants universally while recording the accounting
    transactions.
     Accounting Policies are the specific principles and
    procedures implemented by a company’s management
    team that are used to prepare the it’s financial statements.
    Accounting Concepts

     Business Entity Concept


     Going concern concept
     Money measurement concept
     Periodicity concept
     Accrual concept
    Basic Accounting Concepts
     Business Entity Concept
    A business is an artificial entity distinct from its owners.
     Going Concern Concept
    It means that the entity is going to be continue unless it is
    liquidated.
     Money Measurement Concept
    Each transaction and event must be expressed in monetary
    terms.
     Periodicity Concept
    It helps to measure the performance of business.
     Accrual Concept
    It suggests that incomes and expenses should be recognized as
    and when they are earned and incurred.
    Accounting Principles
    Principles of income Dual aspect Principles of
    recognition principles consistency

    Principles of Principles of Timeliness of


    Materiality Accounting Information
    Expense

    Principles of matching Principles of Neutrality


    cost & revenue conservatism

    Principles of historical Relevance Verifiability


    cost

    Principles of full Reliability


    disclosure
     Principle of Income recognition:
    recognition:
    It tells that to recognize revenue it has to be realised
    not necessary in cash.
     Principle of Expense:
    Expense:
    A payment becomes expenditure or an expense only
    when such payment is revenue in nature and made for
    consideration. Revenue expenses are charged against
    profit and capital expenses are shown in the balance
    sheet as assets.
     Principle of Matching cost & revenue:
    revenue:
    Revenue earned during a period is compared with the
    expenditure incurred to earn that income, whether the
    expenditure is paid during that period or not.
     Principle of Historical cost:
    cost:
    All assets are recorded at the cost of acquisition
    and this cost is the basis for all subsequent
    accounting for the assets.
     Principle of Full disclosure:
    disclosure:
    The Companies Act 1956 requires that income
    statement and balance sheet of a company must
    give a fair and true view of the state of affairs of
    the company.
     Principle of Dual aspect:
    aspect:
    For every debit there is an equivalent credit.
     Principle of Materiality:
    Important details of financial status must be
    informed to all relevant parties. What is material
    and what is not material depends upon the
    nature of information and the party to whom
    the information is provided.
     Principle of Conservatism:
    It says anticipate no profits but provide for all
    possible losses.
     Relevance
    Information should be relevant to the
    decision--making need of the user. It helps users
    decision
    in predicting future trends of the business or
    confirming or correcting any past prediction
    they made.
     Reliability
    Information is reliable if a user can depend
    upon it to be materially accurate and if it
    faithfully represents the information that it
    purports to present.
     Principle of Consistency:
    Consistency:
    Consistency is required to help comparison of
    financial data from one period to another. Eg
    Eg..
    FIFO in stock register.
     Timeliness of Accounting Information:
    The need for accounting information to be
    timely presented to the users for their decision
    making needs.
     Neutrality:
    Information reported in the financial statements
    must be free from bias.
     Verifiability
    Accounting information presented in the
    financial statements must be verifiable by
    independent accountants.
    Accounting Policies
    Specificaccounting principles and methods of
    accounting adopted by the enterprise while
    preparing and presenting the financial statements
    Methods of depreciation

    Valuation of inventory

    Valuation of investments

    Valuation of fixed assets

    Treatment of contingent liabilities

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