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ACCOUNTING CONCEPTS AND PRINCIPLE ABM.pptx

Principles and concept of accounting

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z ACCOUNTING CONCEPTS AND PRINCIPLE
z ACCOUNITNG CONCEPTS
z Business Entity Concept  A business is separate and distinct from its owners, both legally and financially.
z Going Concern Concept  A business will continue to operate for the foreseeable future, allowing for the deferral of certain expenses.
z Accrual Basis Concept  Revenue and expenses are recognized when earned or incurred, regardless of when cash changes hands.
z Money Measurement Concept Only transactions that can be measured in monetary terms are recorded.
z Dual Aspect Concept  Every financial transaction affects at least two accounts, maintaining the accounting equation (Assets = Liabilities + Equity).
z Accounting Period Concept Financial statements are prepared for specific time periods.
z Full Disclosure Concept All relevant information is disclosed in financial statements or notes.
z Matching Concept  Expenses are matched to the revenues they generate within the same accounting period.
z Revenue Realization Concept Revenue is recognized when earned and realizable.
z Historical Cost Concept Assets are recorded at their original purchase price.
z Materiality Concept  Financial information is considered material if its omission or misstatement could influence decisions.
z Consistency Concept Accounting methods are consistent from one period to another
z ACCOUNITNG PRINCIPLES
z Accrual Principle Recognize revenue and expenses when earned or incurred.
z Consistency Principle Use the same accounting methods each year.
z Conservatism Principle Anticipate no gains, but recognize all losses.
z Cost Principle Record assets at their original purchase price.
z Economic Entity Principle Separate business and personal transactions.
z Full Disclosure Principle Disclose all relevant information.
z Going Concern Principle Assume the business will continue operating.
z Matching Principle Match expenses to revenues.
z Materiality Principle  Consider information material if it impacts decisions.
z Monetary Unit Principle Record transactions in a common currency.
z Reliability Principle Ensure transactions are supported by evidence.
z Revenue Recognition Principle Recognize revenue when earned and realizable.
z Time Period Principle Prepare financial statements for specific periods