Here are provided some details of following concepts, principles and conventions of accounting: 1. Entity Concept 2. Money Measurement Concept 3. Periodicity Concept 4. Accrual Concept 5. Matching Concept 6. Going on Concern Concept 7. Cost Concept 8. Principle of Prudence 9. Realization Concept 10. Dual aspect Concept 11. Consistency 12. Materiality Hope, basic of these concepts is easy to understand. Thanking you

1. ACCOUTNING
CONCEPTS, PRINCIPLES
AND CONVENTIONS

2. ACCOUNTING CONCEPTS
Accounting concepts define the
assumptions on the basis of which financial
statements of a business entity are
prepared. The word concept means an idea
or notion, which has universal application.
Financial transactions are interpreted in the
light of the concepts, which govern
accounting methods.

3. ACCOUNTING PRINCIPLES
Accounting principles are a body of set
beliefs commonly associated with the
theory and procedures of accounting
serving as an explanation of current
practices and a guide for selection of
conventions or procedures where
alternatives exist.

4. ACCOUNTING CONVENTIONS
Accounting conventions emerge out of
accounting practices, commonly known as
accounting principles, adopted by various
organizations over a period of time. These
are derived by usage and practice. They
need not have universal application.

5. CONCEPTS, PRINCIPLES AND
CONVENTIONS
Entity Concept
Money Measurement
Concept
Periodicity Concept
Accrual Concept
Matching Concept
Going on Concern
Concept
Cost Concept
Conservatism or
prudence
Realization Concept
Dual Aspect Concept
Consistency
Materiality

6. 1. ENTITY CONCEPT
According to this concept, business is treated
as a unit separate and distinct from its owners,
creditors, managers and others. Business
transactions are recorded in the business
books of accounts and owner’s transactions in
his personal books of accounts. It’s applied to
all organizations whether sole proprietorship
partnership or corporate entities.

7. 2. MONEY MEASUREMENT
CONCEPT
This concept says that only those transactions
and events are recorded in accounting which
are capable of being expressed in terms of
money. Some transactions or events can be
important for business but can’t be measured
in terms of money hence can’t be recorded.

8. 3. PERIODICITY CONCEPT
This is called the concept of defining accounting
period. As the business is intended to continue for a
long period of time, thus the true result of a business’
operations can be ascertained only when the business
is completely wound up. But, ascertainment of profit
after very long period will be of little use to
proprietorship and stakeholders because it will be too
late to take corrective steps at that time. Thus, the
entire life is divided into time-intervals which is
generally 12-months.

9. 4. ACCRUAL CONCEPT
Accrual basis is used for recording of
transactions as it provides more appropriate
information as compared to cash basis.
Accrual concept applies equally to revenues
and expenses. It does not matter if the cash
has been received or not and paid or not. So,
it shows true picture of financial position.

10. 5. MATCHING CONCEPT
In this concept, all expenses matched with the
revenue of that period should be taken into
consideration. In Financial Statements, if any
revenue is recognized then expenses related
to earn that revenue should also be
recognized. It is also based on accrual
concept. Inflow or outflow of cash does not
matter.

11. 6. GOING ON CONCERN
CONCEPT
As per this concept, it is assumed that the
business will continue to exist for a long period
of time in future. Transactions are recorded in
books of business considering this concept. If
this concept is not considered then payment
made for assets would also have been shown
in expenses which would result in a huge loss.

12. 7. COST CONCEPT
According to this concept, an asset is
recorded in books at price at which it
was purchased, historical cost or the
acquisition cost. Subsequent increase or
decrease in market value is not
recorded.

13. 8. REALIZATION CONCEPT
This concept determines the time or the
particular period in which the revenue is
realized. Revenue is deemed to be realized
when the title of ownership is transferred to
purchaser and when he has legally become
liable to pay the amount. It also does not
relate to receipt of cash.

14. 9. DUAL ASPECT CONCEPT
According to this concept, every business
transaction is recorded as having a dual
aspect. It means, every transaction affects
atleast two accounts. If one is Debited,
another must be Credited. This system of
recording transactions is called ‘Double Entry
System’.

15. 10. CONSERVATISM OR
PRUDENCE
According to this convention, all anticipated
losses should be recorded in books of
accounts, but all anticipated or unrealized
gains should be ignored. Conservatism is a
policy of playing safe.
Example: Provision for Bad-Debts is made in
anticipation of actual bad-debts.

16. 11. CONSISTENCY
This concept states that accounting principles and
methods should remain constant from one year to
another. These should not be changed from your to
year. If firm adopts different accounting principles in
two accounting periods, then firms will not be able
to compare the performance of current year to past
years. But, it should not be understood that it does
not allow a firm to change the accounting methods
according to changed circumstances.

17. 12. MATERIALITY
It is an exception to convention of full
disclosure. It says, items having an
insignificant effect or being irrelevant to
users should not be disclosed. These
such items can be merged with others.

18. THANK
YOU