The document discusses key accounting concepts and principles such as Generally Accepted Accounting Principles (GAAP), Accounting Standards, International Financial Reporting Standards (IFRS), the going concern concept, accrual concept, accounting entity concept, measurement in monetary terms, accounting period concept, cost concept, dual aspect concept, realization concept, and matching concept. It provides explanations and examples for each concept.

2. Accounting rules derived from experience and practice having proved and
accepted as useful and correct become Generally Accepted Accounting
Principles (GAAP).
The uniform, definite and universally accepted accounting rules developed by
International Accounting Standard and Institute of Chartered Accountants of India are
known as Accounting Standard. These Accounting Standards have been developed to
prevent financial scandals and business failures.
IFRS is a single set of high quality, understandable and enforceable global accounting
standards. It is a “principles based” set of standards which are drafted lucidly and are
easy to understand and apply. IFRS adoption as universal financial reporting language
is gaining momentum across the globe. Most of the countries have implemented IFRS
and converged their natural GAAP to IFRS.
Generally Accepted Accounting Principles (GAAP)
Accounting Standard
International Financial Reporting Standard (IFRS)

3. Accounting assumes business enterprise to last long and carried on indefinitely.
The business enterprise is viewed as going concern that is continuing operation
for the foreseeable future. It is therefore we show all assets on its original value
less depreciation.

4. 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.
Particulars ` Particulars `
Cash A/c (For 2018 - 19)
By Machinery 5,000
Furniture purchased on
29th March 2019
Payments received on
3rd April 2019

5. Business is assumed to have distinct entity other than its owners. Business
transactions are to be recorded in the books of the accounts from business
point of view not from the owner’s point of view. Identification of items, whether
assets, liabilities, revenue or expense are made from business point of view.
Owner should be treated as a creditor up to the extent to his capital.

6. Accounting transactions must be capable of being measured in terms of
money. These transactions must be financial in nature. We can not record that
transaction which can not be measured in terms of money, it does not matter
how important it is from business point of view. For example a quarrel between
sales and production manager or strike in factory.
Debtors/Creditors
Goods
Assets

7. The performance of the business enterprise must be assessed and measured
after an accounting period i.e. 12 months. In India we follow accounting period
from April 1 to March 31 of next year.

8. 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.
Sales 5,000
(cost of acquisition,
transportation and
installation)

9. Every business transaction must have dual aspect i.e., every debit must have
its corresponding credit. If there is receiver, there must be giver. If someone is
purchaser, someone must be seller. If something is received, something must
be given and loss for somebody must be gain for someone. In the same way,
according to modern accounting equation approach every asset has got its
corresponding liability
Machinery purchased for cash Rs. 5,000
Particulars ` Particulars ` Particulars ` Particulars `
Machinery A/c Cash A/c
To Cash A/c By Machinery A/c5,000 5,000

10. This concept states that revenue from any business transaction should be
included in the accounting records only when it is realised. The term
realisation means creation of legal right to receive money.
Assets 5,000

11. The matching concept states that the revenue and the expenses incurred to
earn the revenues must belong to the same accounting period. According to
this principle income can be ascertain by matching revenue of the business
with its costs.
Rent paid 24,000, out of which 2,000 belongs to the next
year.
Rent 24,000
- Prepaid 2,000
22,000