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    Accounting Principles

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    Accounting Principles

    Uploaded by

    ravikshabansal0806
    7 views5 pages

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    Accounting Principles.pptx

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    7 views5 pages

    Accounting Principles

    Uploaded by

    ravikshabansal0806

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    Accounting Principles

    ✔Assumptions
    ✔Concepts
    ✔Conventions
    Accounting Assumptions
    Fundamental Accounting Assumptions
    Certain fundamental accounting assumptions underlie the preparation
    and presentation of financial statements. They are usually not
    specifically stated because their acceptance and use are assumed.
    Disclosure is necessary if they are not followed. The following have
    been generally accepted as fundamental accounting assumptions:—
    a. Going Concern
    The enterprise is normally viewed as a going concern, that is, as
    continuing in operation for the foreseeable future. It is assumed that the
    enterprise has neither the intention nor the necessity of liquidation or of
    curtailing materially the scale of the operations.
    b. Consistency
    It is assumed that accounting policies are consistent from one period to
    another.
    c. Accrual
    Revenues and costs are accrued, that is, recognised as they are
    earned or incurred (and not as money is received or paid) and
    recorded in the financial statements of the periods to which they relate.
    Accounting Concepts
    • Business entity concept: This concept assumes that,
    for accounting purposes, the business enterprise and its
    owners are two separate and independent entities.
    • Money measurement concept: This concept assumes
    that all business transactions must be in terms of money,
    that is in the currency of a country.
    • Accounting period concept: All the transactions are
    recorded in the books of accounts on the assumption that
    profits on these transactions are to be ascertained for a
    specified period.
    • Cost concept: Accounting cost concept states that all
    assets are recorded in the books of accounts at their
    purchase price, which includes cost of acquisition,
    transportation and installation and not at its market price.
    Accounting Concepts
    • Dual aspect concept: This concept assumes that every
    transaction has a dual effect. Therefore, the transaction
    should be recorded at two places.
    • Realisation concept: This concept states that revenue
    from any business transaction should be included in the
    accounting records only when it is realised. The term
    realisation means creation of legal right to receive money.
    Selling goods is realisation, receiving order is not.
    • Revenue Recognition concept: It denotes the
    method of determining whether or not income has met
    the conditions of being earned and realized or is
    realizable.
    • Matching concept: The matching concept states that the
    revenue and the expenses incurred to earn the revenues
    must belong to the same accounting period.
    Accounting Conventions
    • Convention of full disclosure: Convention of full
    disclosure requires that all material and relevant facts
    concerning financial statements should be fully
    disclosed.
    • Convention of materiality: The convention of
    materiality states that, to make financial statements
    meaningful, only material fact i.e. important and relevant
    information should be supplied to the users.
    • Convention of conservatism: This convention is
    based on the principle that “Anticipate no profit, but
    provide for all possible losses”.
    • Convention of Objectivity: The accounting
    transactions must be objective and verifiable.

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