In earlier section, we had illustrated accounting as the language of business. Along with language, accounting has several dialects. There are dissimilarities in terminology. In dealing along with the framework of accounting theory, one is confronted along with a critical problem occurring from differences in terminology. Various words and terms have been used through various writes to express and describe similar concept or notion. Hence, confusion abounds in the literature insofar as the theoretical framework is involved.
The different terms used for illustrating the fundamental concepts are: postulates, concepts, propositions, fundamental assumptions, fundamentals, underlying principles, rules, conventions, doctrines, etc. Though each of these terms is able of precise definition, common usage by the profession of accounting has served to provide them loose and overlapping meanings. Similar concept has been described through one author as a concept and through another as a convention. To acquire the other instance, the concept implied in conservatism has been labeled through one author as a modifying convention, through the other as a principle, and through yet the other as a doctrine. The broad diversity in terminology to state the fundamental framework can only serve to confuse the learner.
Without falling in the trap of this terminological maze, we will describe below, a few broadly recognized concepts and we identify all of these concepts. We do feel, though, that several of these concepts have a better claim to be termed as concepts, whereas the rest must be termed as conventions. Fundamental accounting concepts are broad, general assumptions such underlie the periodic financial accounts of business enterprises. The cause why several of these concepts must be termed as concepts is that they are fundamental assumptions and have a direct bearing on the quality of financial accounting information. The alteration of any of the fundamental concepts or postulates would change the entire nature of financial accounting.