ACCOUNTING PRINCIPLES

1. Submitted by:
P.CHAITANYA REDDY
‘A’ section
Rool no:34

2. ACCOUNTING PRINCIPLES can be brodely
classified into two types. A. accounting concepts
B. accounting conventions

3. ACCOUNTING CONCEPTS
 MONEY MEASUREMENT CONCEPT : While recording
the business transactions we do not record them in terms
of kilos,quintals,meters,liters etc. We record them in a
common denomination so as to seethatthey become
homogeniousand meaningfull.money dous this function.it
is adopted as the common measuring unit.hence recording
is done in terms of standard currency of the country where
the business is set up. We have to remember that onil
those transactions and events which can be expressed in
termes of money are recorded in the books of accounts

4. ACCOUNTING
CONCEPTS
 BUSINESS ENTITY CONCEPT : This concept implies
that the business is distinct from the person who own
it. If the owner takes any cash or goods from the
business, the drawings account is debited and cash or
goods account is credited
ASSETS=LIABILITIES+CAPITAL
it implais that capital is another liability which
business owes its property.
 GOINCONCERN CONCEPT : it is assumed that the
business will continue for a long time. With this
assumption fixed assets are recorded in the at their
original cost.

5. ACCOUNTING
CONCEPTS
 COST CONCEPT :usually all the transactions will be
recorded at cost in the books.however , at the end of
the year the accountant shows the reduced value of
the asset, after providing depreciation.
 DUAL ASPECT CONCEPT : This concept throws light
on the point that each transaction has two fold affect
the receiving of the benifite and given of the benefit .
The receiving aspect is termed as DEBIT , where as
the giving aspect is CREDIT. Therefore , FOR EVERY
DEBIT , THERE IS A COROSPONDING CREDIT
LIABILITIES(EQUITIES) = ASSETS
OR
CAPITAL+OUTSIDE LIABILITIES =ASSETS

6. ACCOUNTING
CONCEPTS
 ACCOUNTING PERIOD CONCEPT : accounting
period is the period followed by a business concern
for maintaining accounts to know the profit and loss
1st jan to 31st dec (calander year )
1st apr to 31st mar (financial year )
 MATCHING CONCEPT :according to this principle ,
the expences incurred in an accounting period should
be matched with the revenues recognised in that
period
 OBJECTIVE EVIDENCE CONCEPT :according to this
concept all accounting transactions should be
evedence

7. ACCOUNTING
CONCEPTS
And supported by objective document . The documents
includes invoices,receipts,cash memos etc.
 ACCRUAL CONCEPT : the accrual system is a
method whereby revenes and expences are identified
with spesific periods of time like a month , half year
or a year.

8. ACCOUNTING
CONVENTIONS
 FULL DISCLOSER CONCEPT : this concept deals
with the convention that all information which is of
material importance should be disclosed in the
accounting statements .
 METERIALITY CONCEPT : under this concept trader
records imp facts about the commertial activities in
the form of financial statements
 CONSISTENCY CONCEPT : The methods or
principles followed in the preparation of various
accounts should be followed in the years to come
 CONSERVATISM CONCEPT : this concept warns the
trader not to take unrealised incomes into account.
folling are the examples of applications of this
concept

9. ACCOUNTING
CONVENTIONS
a) Making provision for dougtfull debts and discount on
debtors.
b) Not providing for discount on creditors.
c) Valuing stick in trade at cost or marcket price whichever
is less.