Accounting Concepts

Accounting Concepts:

1. Business Entity Concept : In Accounting the business and the proprietors are regarded as two separate entities. All the transactions of business are recorded from the point of view of business is a separate entity.

2. Dual Aspect / Accounting / Balance sheet Concept : According to this concept each transaction has two folded affect, the receiving of the benefit and the giving of the benefit. The receiving aspect is called Debit and the giving aspect is called Credit. Therefore for every Debit (Dr) there will be a corresponding Credit (Cr).

Accounting Equation

Assets = Liabilities+ Capital

3. Going Concern Concept : It is assumed that the business will continue for a fairly long time until it is dissolved. This is called the going concern concept.

4. Cost Concept : All the transactions should be recorded at cost in the books of accounts and this cost will be the basis for all subsequent accounting for the asset.

(OR)

An asset is ordinarily entered in the accounting records at the price paid to acquire it and this cost is the basis for all subsequent accounting for the asset.

5. Money Measurement Concept : In accounting, a record is made only of those transactions, which can be expressed in terms of money. It helps to express heterogeneous (various kinds of) items such as Bank Balance, Machinery and stock etc.

6. Accounting Period Concept : According to this concept, the life of the business is divided into appropriate segments for studying the results shown by the business after each segment. Accounting period is the period followed by a business concern for studying the results shown by the business after each period. Usually one year will be Accounting Period

7. Matching Concept : According to this principle the expenses incurred in an accounting period should be matched with the revenue recognized in that period.

8. Realisation Concept: According to this concept all the transactions are recorded when they are realised but not on the base of cash paid or cash received.

9. Accrual Concept: This concept implies that the income should be measured as a difference between revenue and expenditure rather than the difference between cash received and cash disbursements.