Concepts of Accounting: 1. Business entity concept: According to this concept, the business is treated as a separate entity distinct from its owners and others. 2. Going concern concept: According to this concept, it is assumed that a business has a reasonable expectation of continuing business at a profit for an indefinite period of time. 3. Money measurement concept: This concept says that the accounting records only those transactions which can be expressed in terms of money only. 4. Cost concept: According to this concept, an asset is recorded in the books at the price paid to acquire it (Actual cost) and that this cost is the basis for all subsequent accounting for the asset. 5. Dual aspect concept: In every transaction, there will be two aspects – the receiving aspect and the giving aspect; both are recorded by debiting one accounts and crediting another account. This is called double entry. 6. Accounting period concept: It means the final accounts must be prepared on a periodic basis. Normally accounting period adopted is one year, more than this period reduces the utility of accounting data. 7. Realization concept: According to these concepts, revenue is considered as being earned on the data which it is realized, i.e., the date when the property in goods passes the buyer and he become legally liable to pay. 8. Materiality concept: It is a one of the accounting principle, as per only important information will be taken, and unimportant information will be ignored in the preparation of the financial statement. 9. Matching concept: The cost or expenses of a business of a particular period are compared with the revenue of the period in order to ascertain the net profit and loss. 10. Accrual concept: The profit arises only when there is an increase in owner’s capital, which is a result of excess of revenue over expenses and loss.
Posted on: Mon, 28 Oct 2013 16:34:12 +0000
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