What do you mean by accounting concepts ? Descibe the various accounting concepts?
Answers
Answer:
MARK AS BRAINLIST
Accounting concept refers to the basic assumptions and rules and
principles which work as the basis of recording of business transactions
and preparing accounts
Explanation:
Following are the various accounting
concepts that have been discussed in the following sections :
l Business entity concept
l Money measurement concept
l Going concern concept
l Accounting period concept
l Accounting cost concept
l Duality aspect concept
l Realisation concept
l Accrual concept
l Matching concept
Business entity concept
This concept assumes that, for accounting purposes, the business enterprise and its owners are two separate independent entities. Thus, the business and personal transactions of its owner are separate. For example, when the owner invests money in the business, it is recorded as liability of the business to the owner. Similarly, when the owner takes away from the
business cash/goods for his/her personal use, it is not treated as business
expense. Thus, the accounting records are made in the books of accounts
from the point of view of the business unit and not the person owning the
business. This concept is the very basis of accounting
GOING CONCERN CONCEPT
This concept states that a business firm will continue to carry on its activities for an indefinite period of time. Simply stated, it means that every business entity has continuity of life. Thus, it will not be dissolved in the near future. This is an important assumption of accounting, as it provides a basis for showing the value of assets in the balance sheet
ACCOUNTING PERIOD CONCEPT
All the transactions are recorded in the books of accounts on the assumption that profits on these transactions are to be ascertained for a specified period. This is known as accounting period concept. Thus, this concept requires that a balance sheet and profit and loss account should be prepared at regular intervals. This is necessary for different purposes like, calculation of profit, ascertaining financical position, tax computation etc.
ACCOUNTING COST CONCEPT
Accounting cost concept states that all assets are recorded in the books of
accounts at their purchase price, which includes cost of acquisition,
transportation and installation and not at its market price. It means that fixed assets like building, plant and machinery, furniture, etc are recorded in the books of accounts at a price paid for them.
DUAL ASPECT CONCEPT
Dual aspect is the foundation or basic principle of accounting. It provides
the very basis of recording business transactions in the books of accounts.
This concept assumes that every transaction has a dual effect, i.e. it affects
two accounts in their respective opposite sides. Therefore, the transaction
should be recorded at two places. It means, both the aspects of the
transaction must be recorded in the books of accounts. For example, goods
purchased for cash has two aspects which are (i) Giving of cash
(ii) Receiving of goods. These two aspects are to be recorded.
REALISATION CONCEPT
Revenue is said to have been realised when cash has been received
or right to receive cash on the sale of goods or services or both has
been created.
ACCRUAL CONCEPT
The meaning of accrual is something that becomes due especially an amount of money that is yet to be paid or received at the end of the accounting period. It means that revenues are recognised when they become receivable. Though cash is received or not received and the expenses are recognised when they become payable though cash is paid or not paid. Both transactions will be recorded in the accounting period to which they relate.
MATCHING CONCEPT
The matching concept states that the revenue and the expenses incurred to earn the revenues must belong to the same accounting period. So once the revenue is realised, the next step is to allocate it to the relevant accounting period. This can be done with the help of accrual concept.
Answer:
(1) Accounting Concepts or Assumptions : –
In order to make the accounting language convey the same meaning to all people and to make it more meaningful, most of the accountants have agreed on a number of concepts which are usually followed forpreparing the financial statements. These concepts provide a foundation for accounting process. No enterprise can prepare its financial statements without considering these basic concepts or assumptions. These concepts guide how transactions should be recorded and reported. Following may be treated as basic concepts or assumptions :-
As per Accounting Standard (AS-1),
It is issued by the Institute of Chartered Accountants of India, there are three fundamental accounting concepts or assumptions:
(1) Going Concern Concept
(2) Consistency Concept
(3) Accrual Concept
Other Accounting Concepts :
(4) Business Entity Concept
(5) Money Measurement Concept
(6) Accounting Period Concept
(7) Cost Concept or Historical Cost Concept
(8) Matching Concept
(9) Dual Aspect Concept
(10) Matching Concept
(11)Objectivity Concept.