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    Accounting Principles

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    Piyush Ajmera
    Accounting principles are the rules and guidelines that govern accounting practices. They become generally accepted accounting principles (GAAP) when used widely by accountants worldwide. Key GAAP concepts include the accounting period concept, dual aspect concept, and separate entity concept. The accounting period concept establishes a definite time period, usually a fiscal year, for preparing financial statements. The dual aspect concept underlies double-entry bookkeeping, where every transaction has two equal and offsetting aspects. The separate entity concept treats a business as distinct from its owners for accounting purposes.

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    Accounting Principles

    Uploaded by

    Piyush Ajmera
    374 views11 pages
    Accounting principles are the rules and guidelines that govern accounting practices. They become generally accepted accounting principles (GAAP) when used widely by accountants worldwide. Key GAAP concepts include the accounting period concept, dual aspect concept, and separate entity concept. The accounting period concept establishes a definite time period, usually a fiscal year, for preparing financial statements. The dual aspect concept underlies double-entry bookkeeping, where every transaction has two equal and offsetting aspects. The separate entity concept treats a business as distinct from its owners for accounting purposes.

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    Accounting principles are the rules and guidelines that govern accounting practices. They become generally accepted accounting principles (GAAP) when used widely by accountants worldwide. Key GAAP concepts include the accounting period concept, dual aspect concept, and separate entity concept. The accounting period concept establishes a definite time period, usually a fiscal year, for preparing financial statements. The dual aspect concept underlies double-entry bookkeeping, where every transaction has two equal and offsetting aspects. The separate entity concept treats a business as distinct from its owners for accounting purposes.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    374 views11 pages

    Accounting Principles

    Uploaded by

    Piyush Ajmera
    Accounting principles are the rules and guidelines that govern accounting practices. They become generally accepted accounting principles (GAAP) when used widely by accountants worldwide. Key GAAP concepts include the accounting period concept, dual aspect concept, and separate entity concept. The accounting period concept establishes a definite time period, usually a fiscal year, for preparing financial statements. The dual aspect concept underlies double-entry bookkeeping, where every transaction has two equal and offsetting aspects. The separate entity concept treats a business as distinct from its owners for accounting purposes.

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    of 11

    A Presentation On,

    Accounting Principles..

    What are Accounting Principles?


    Every Science consists of principles. Since accounting is a science, it also consists of Principles. According to the Canadian Institute Of Chartered Accountants,
    Accounting Principles are the body of doctrines commonly associated with the theory and procedure of accounting. They serve as an explanation of current practices and as a guide for the selection of conventions or procedures where alternatives exist.

    What is Generally Accepted Accounting Principles (GAAP) ?

    Accounting Principles when accepted by accountants all over the worls, are known as Generally Accepted Accounting Principles. In this way, GAAP are the set of rules and guidelines used in accounting. Accounting Principles become GAAP when they satisfy following three criteria :-

    Usefullness : The accounting principle should increase the usefulness of accounting records by making accounting information more meaningful. Objectivity : An accounting prnciple should be reliable and trustworthy in the sense that accounting information should be supported by facts and should not be influenced by personal bias. Feasibility : An accounting principle should be practical in sense that it can be implemented without any difficulty.

    The term accounting concept includes those basic assumptions or conditions upon which the science of accounting is based.

    Some Important Accounting Concepts


    Accounting Period Concept Dual Aspect Concept Separate Entity Concept Money Masurement Concept Realization Concept Cost Concept Going Concern Concept Accounting Equivalence Concept Consistency Concept Matching of Cost & Revenue Concept Accrual Concept Consercatism

    Accounting Period Concept


    Also called as the concept of definite accounting period. According to this concept, accounts should be prepared after every period and not at the end of the entity. Usually, this period is one calender year. In india, one period starts from 1st April of a year to 31st March of the immediately following year. This period is called a Financial Year

    Accounting Period Concept Contd...

    At the end of each period, Final accounts of the firm is made (Balance Sheet and Income Statement) Facilitates comparing of financial statements of different periods. Helps in uniform and consistent accounting treatement for acertaining the profit and assets of the business. Matching of periodic revenues with expenses for getting correct result of the business operation is possible.

    Dual Aspect Concept


    This is the core of doble entry book-keeping. According to this concept, all business transactions involve 2 fold aspects and both the aspects have to be recorded in the books of account.

    Liabilities + Capital = Assets This is called as the Accounting Equation

    Dual Aspect Concept Contd...

    Thus we can say that, Increase in one asset decreases other asset. Increase in one asset situltaneously increases liability. Decrease in one asset increae another asset. Decrease in one asset decreases the liability Vice Versa

    Separate Entity Concept


    According to this concept, business is considered to be seprate entiy from the propritor(s). This concpt is extremly helpful in keeping business affairs stricly free from the affects of private affairs of the proprietor. Sole Proprietor and partners are not considered as seperate entities in the eyes of law, yet for accounting purpose, they will be considered as seperate entities.

    Separate entity Concept Contd...

    On the basis of this concept, proprietor is treated as a creditor for the businessWhen he contributes capital, he is treated as a person who has invested his amount in the business and therefore capital appears in the liability side of a balnce sheet of the proprietors business.

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