Question

2. "Revenue earned and cost of earning that revenue should be properly identified
for a period.'' Explain this statement.
3. What are Accounting Concepts? Explain any two of them.​

Answer 1

2. The above quoted statements highlights the importance of matching principle. As per the principle the revenues earned during a period should be correctly matched against the expenses incurred by a firm during an accounting period to correctly report the accounting profits earned during a year. Accordingly, there is a need to ascertain and report the corrected revenues and cost of earning revenue so as to account for corrected profits.

3. Answer:

Accounting concepts is the basic rules, assumptions and principles which is considered as the basis of recording of business transactions and preparing the accounts.

—»There are nine types of accounting concepts which are as follows:

1. Business Entity Concept

2. Money Measurement Concept

3. Dual Aspect Concept

4. Going Concern Concept

5. Accounting Period Concept

6. Cost Concept

7. The Matching Concept

8. Accrual Concept

9. Realization Concept

2. Money Measurement Concept: Money Measurement Concept states that a business can be recorded only those transactions which is expressed in terms of money.The fact or transactions which can not be expressed in money terms is not recorded in the books of accounts. The limitation of this concept is, some facts may be very important but can not be recorded because that transactions or facts can not be measured in money terms.

5. Accounting Period Concepts: Accounting Period Concept states that the business should be divided into appropriate segments. The life of business is segregated into different period such as 1 year, 6 months etc. to know the performance of the business.