Question

25. State the accounting concept/ convention involved in each of the following situation: (i) Advance received from a customer is not taken as income or sales.
(ii) The caliber or quality of the management team is not disclosed in the Balance Sheet.
(iii) Capital contributed by the proprietor is credited to his capital account.
(iv) financial statements of the firm are prepared every year on 31st March.

Answer 1

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i ) Advance received from a customer is not taken as income or sales

Ans ) Conservation concept or prudence concept.

Because , in this concept , States that business transaction should be recorded in such a manner that profits are not over stated.

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ii ) The caliber or quality of the management team is not disclosed in the Balance sheet.

Ans ) Money Measurement Concept

Because, this concept states that only those transactions and happenings in an organisation which can be expressed in terms of money.

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iii ) Capital Contributed by the proprietor is credited to his capital a/c.

Ans ) Business Entity Concept.

Because, This Concept assumes that business has distinct and separate entity from its owners.

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iv ) Financial statements of the firm are prepared every year on 31st March.

Ans ) Consistency Concept.

Because, this concept states that Accounting policies and practices followed by enterprises should be uniform and constant from one year to another.

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