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    Basics of Accounting 2 Concepts and Conventions

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    This document discusses key accounting concepts and conventions. It explains that accounting concepts provide the foundational assumptions for preparing financial statements, including the separate entity, going concern, dual aspect, money measurement, cost, accounting period, accrual, and matching concepts. Accounting conventions like consistency, disclosure, conservatism and materiality guide the preparation of financial statements to make them clear, meaningful and comparable over time. Accounting principles bring together both concepts and conventions to establish uniform rules for recording and reporting financial information.

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    Basics of Accounting 2 Concepts and Conventions

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    jiten zope
    25 views6 pages
    This document discusses key accounting concepts and conventions. It explains that accounting concepts provide the foundational assumptions for preparing financial statements, including the separate entity, going concern, dual aspect, money measurement, cost, accounting period, accrual, and matching concepts. Accounting conventions like consistency, disclosure, conservatism and materiality guide the preparation of financial statements to make them clear, meaningful and comparable over time. Accounting principles bring together both concepts and conventions to establish uniform rules for recording and reporting financial information.

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    This document discusses key accounting concepts and conventions. It explains that accounting concepts provide the foundational assumptions for preparing financial statements, including the separate entity, going concern, dual aspect, money measurement, cost, accounting period, accrual, and matching concepts. Accounting conventions like consistency, disclosure, conservatism and materiality guide the preparation of financial statements to make them clear, meaningful and comparable over time. Accounting principles bring together both concepts and conventions to establish uniform rules for recording and reporting financial information.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    25 views6 pages

    Basics of Accounting 2 Concepts and Conventions

    Uploaded by

    jiten zope
    This document discusses key accounting concepts and conventions. It explains that accounting concepts provide the foundational assumptions for preparing financial statements, including the separate entity, going concern, dual aspect, money measurement, cost, accounting period, accrual, and matching concepts. Accounting conventions like consistency, disclosure, conservatism and materiality guide the preparation of financial statements to make them clear, meaningful and comparable over time. Accounting principles bring together both concepts and conventions to establish uniform rules for recording and reporting financial information.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 6

    Basics of Accounting

    Concepts & Conventions

    Dr. Rupali Gupta


    Accounting
    Principles

    Accounting Accounting
    Concepts conventions

    Accounting provides financial information about a business


    organisation.

    In order to maintain uniformity and consistency in preparing and


    maintaining books of accounts, certain rules/ principles have been
    evolved upon which entire accounting is based.

    These rules/ principles are classified as concepts and conventions.


    Accounting Concepts
    • Accounting Concepts can be understood as the basic accounting
    assumption, which acts as a foundation for the preparation of financial
    statement of an enterprise.
    • Indeed, these form a basis for formulating the accounting principles,
    methods and procedures, to record and present the financial transactions
    of business.
    • These concepts provide an integrated structure and rational approach to
    the accounting process.
    • Every financial transaction that occurs is interpreted taking into
    consideration the accounting concepts, which guides the accounting
    methods Concept
    Accounting Conventions
    These are customs/ traditions guiding the preparation of accounting
    statements.

    They are adopted to make financial statements clear and meaningful. They
    represent usage or methods generally accepted and customarily used. These
    exists in cases where there are different alternatives, which are equally
    logical and some of these are generally accepted having consideration of
    cost, time, habit or convenience.
    Accounting Principles

    Accounting Concepts Accounting Conventions

    • Separate Entity Concept


    • Disclosure
    • Going Concern Concept
    • Materiality
    • Dual Aspect Concept
    • Money Measurement Concept • Consistency
    • Cost Concept
    • Conservatism
    • Accounting Period Concept
    • Accrual Concept
    • Matching Concept (periodic
    matching of cost and revenue)
    • Realisation Concept (revenue
    recognition)
    • Verifiable Object Evidence Concept
    Accounting Conventions

    o Consistency: Financial statements can be compared only when the


    accounting policies are followed consistently by the firm over the period.
    However, changes can be made only in special circumstances.

    o Disclosure: This principle state that the financial statement should be


    prepared in such a way that it fairly discloses all the material information to
    the users, so as to help them in taking a rational decision.

    o Conservatism: This convention states that the firm should not anticipate
    incomes and gains, but provide for all expenses and losses.

    o Materiality: This concept is an exception to the full disclosure convention


    which states that only those items to be disclosed in the financial
    statement which has a significant economic effect.

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