Accounting concepts, Financial Accounting

Assignment Help:

Accounting concepts

The word 'Accounting Concept' is used to denote necessary assumptions and ideas which are basic to accounting practice. The variety of accounting concepts is like this:

  • Business Entity concept: For accounting reason, the owner of an enterprise is constantly considered to be separate and distinct from the business which he/she controls
  • Dual aspect concept: each business transaction engage two aspects - a receipt and a payment. That is, each debit has an equal and corresponding credit. The dual facet idea is expressed as: Capital + Liabilities = Assets. This is identified as 'the accounting equation'.
  • Going concern concept: Under this statement, the enterprise is usually viewed as a going concern. It is unspecified that the enterprise has neither the intention nor the necessity of liquidation of curtailing materially the level of its operations. That is why possessions are valued on the source of going concern concept and are depreciated on the basis of expected life sooner than on the basis of market value.
  • Accounting period concept: 'Accounting year' is the era of 12 months for which accounts are to be equipped under the Companies Act and Banking Regulation Act.
  • Money measurement concept: In accounting, each event or transaction which can be articulated in terms of money is recorded in the books of accounts.

This idea does not trace any fact or happening, however significant it is to the business, in the books of accounts if it cannot be spoken in terms of money. And as per this idea, a transaction is recorded at its money worth on the date of occurrence and the following changes in the money value are suitably unnoticed.

  • Historical Cost concept: The fundamental idea of cost concept is - i) asset is recorded at the price paid to obtain it, that is, at cost and ii) this cost is the base for all following accounting for the asset. Fixed assets are exposed in the books of accounts at cost less depreciation. Current assets are from time to time valued at cost price or market price, either is less.
  • Revenue recognition concept: In accounting, 'revenue' is the gross inflow of cash, receivables or other reflections arising in the track of an enterprise from the sale of goods, from the representation of services and from the holding of possessions. In the case of profits, the key question is at what stage the transaction should be recorded and recognized.
  • Periodic matching of cost and revenue concept : After the revenue appreciation, all costs incurred in earning that revenue should be charged beside that revenue in order to establish the net income of the business.
  • Verifiable objective evidence concept: as said by this idea, all accounting have to be based on objective proof. i.e., the transactions should be supported by confirmable documents.
  • Accrual concept: beneath this idea, revenue recognition and costs for the applicable period depend on their realization and not on definite receipt or payment. In relation to revenue, the accounts should keep out amounts relating to subsequent period and offer for revenue recognized, but not received in cash. likewise, in relation to costs, offer for costs incurred but not paid and prohibit costs paid for succeeding period.

Related Discussions:- Accounting concepts

What would be the money multiplier, The SIMPLEX financial system is charact...

The SIMPLEX financial system is characterized by a required reserves ratio of 11 percent; initial excess reserves are $1 million, and there are no currency or other leakages. a.

Write a brief memo, Middlehurst House is a daycare center/preschool which o...

Middlehurst House is a daycare center/preschool which operates as a partnership of George Friedman and Bill Compton. The center is in a city that has a large base of twoincome fami

The most common critical point for recognizing revenue, for a typical manuf...

for a typical manufacturing company, the most common critical point for recognizing revenue is the date a an order is recieved b. production is completed c the product is delievere

Accounts, the salaries paid in 2004 is rs. 500000 salaries outstanding is r...

the salaries paid in 2004 is rs. 500000 salaries outstanding is rs.20000 salaries paid in advance for 2004 is rs 30000 what is the actual salary expenditure for 2004?

What is the value of the firm, Firm Value: Old School Corporation expec...

Firm Value: Old School Corporation expects an EBIT of $9,000 every year forever. Old School currently has no debt, and its cost of equity is 18 percent. The firm can borrow at

605, I am working on the comprehensive probelm and I can not figure out the...

I am working on the comprehensive probelm and I can not figure out the trial balance. Where am I going wrong?

Potential sources of finance for very new businesses, Potential sources of ...

Potential sources of finance for very new businesses Initial owner finance is almost always the first source of finance for a business, whether from the owner or from family co

Analyse the net worth, Igor and Angela were married in 2005, separated in 2...

Igor and Angela were married in 2005, separated in 2011, and divorced recently. At the time of marriage, each had some investments and personal assets. They both worked during the

Binary coded decimal, Binary Coded Decimal BCD stands for Binary Coded ...

Binary Coded Decimal BCD stands for Binary Coded Decimal. The information given to the computer is stored temporarily before it is processed.  Consider a number 827. The bin

Looking for final acounts, Looking for Income Statement and Balance Sheet f...

Looking for Income Statement and Balance Sheet for the Better USA, Inc. company for 2010 and 2011 There are two sets of numbers, after each category. The first will represent 2010

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd