easily described concepts in acconting

1. Accounting
concepts
Guided by
D r. Rajeshwari Triwedi
Assistant Prof.
Submitted by
Kritika das
B .sc. IT ( III sem)

2. Accounting concepts : Types
•Business entity concept
•Historical cost payment
•Going concern concept
•Money measurement
concept
•Accounting period conce

3. ACCOUNTING CONCEPTS : TYPES
•ACCURAL CONCEPT
•REVEANUE RECOGNITION
CONCEPT
• DUAL ASPECT CONCEPT
•MATCHING CONCEPT
COST BENEFIT
PRINCIPLE
•TIMELY

4. What is accounting concept
Accounting concept are
customs and tradition which
are used as a guide for
preparation of financial
statements.

5. Bussiness entity concept
In accounting we treat a business
or an organization and its owners
as two separately Identifiable
parties. It means that personal
transactions of owners are treated
separately from those of the
business.

6. businessowner
Cash
(capital)
Cash
(drawings)

7. Going concern concept
• As per International Accounting Standards, it is a
fundamental accounting assumption underlying the
preparation of financial statements.
•Business will continue for a long period.
•This concept is known as concept of long term
assets.
•As per this concept, fixed assets are recorded at
their original cost & depreciation is charged
on these assets.
•Because of this concept, outside parties enter into
long term contracts with the enterprise.

8. • Accounting period is of two types- financial
year(1st Apr to 31st March)
calendar year(1st Jan to 31st Dec).
sometime it may be less than twelve
months i.e., quarterly, half yearly, etc.
Reports made for less than twelve months
are called interim reports and are less
reliable than annual reports.
ACCOUNTING PERIOD CONCEPT

9. Money measerment concept
•Money Measurement Concept in
accounting, also known as
measurability Concept,
•only transactions and events that
are capable of being measured in
monetary terms are recognized in
the financial statements.

10. Assets
Converted into
monitoryy term
Account book
entry

11. Accural concept
Accural concept is the most
fundamental principle of accounting
which requires recording revenues
when they are earned and not when
they are received in cash, and
recording expenses when they are
incurred and not when they are paid.

12. Historical cost concept
•The historical cost concept states that the
assets and liabilities of a business should be
presented in accounting records at their
historical cost.
•Historical cost is the amount that is
originally paid to acquire the asset and
may be different from the current market
value of the asset.

13. Generally this segment of time is one year
either calendar year or a financial year.
Sometime it may be less than twelve
months i.e., quarterly, half yearly, etc.
Reports made for less than twelve months
are called interim reports and are less
reliable than annual reports. At the end of
each segment (period
ACCOUNTING PERIOD CONCEPT

14. DUAL ASPECT CONCEPT
Every transaction recorded in
books affects at least two accounts.
If one is debited then the other one is
credited with same amount.
This system of recording is known as
“DOUBLE ENTRY SYSTEM”.

15. in the other aspect the business has
to pay this amount to Mr. Aditya Raj.
200000 Rs
In one aspect cash is coming into
business
date particular l.F. Debit credit
1 jan
Cash A/c
To capitalA/c
200000
200000

16. This transaction can be expressed in
the following equation
capital = Assets (Cash)
2,00,000 = 2,00,000
Here cash (assets) is the resource of
the business and capital is the claim of
the proprietor

17. • If the business purchases furniture of
20,000 on credit, the above equation will
change as follows:
• Capital + Creditors = Cash + Furniture
2,00,000 + 20,000 = 2,00,000 + 20,000
Capital + Liabilities = Assets

18. REVENUE RECOGNITION/REALISATION
CONCEPT
Revenue means the addition to the
capital as a result of business
operations.
Revenue is realised on three basis-:
1. Basis of cash
2. Basis of sale
3. Basis of production

19. Matching concept
All the revenue of a particular period
will be matched with the cost of that
period for determining the net profits
of that period.
Accordingly, for matching costs with
revenue, first revenue should be
recognised & then costs incurred for
generating that revenue should be
recognised.

20. COST BENEFIT PRINCIPLE
This principle states that the cost
incurred in applying the
principles should be less than the
profits derived from
them.

21. Timely
This principle states that
the information should
be provided to the users
at right time for the
purpose of decision
making.
Delay in providing
accounts serves no
usefulness for the users
for decision making.

22. References
Financial accounting ,by Dr S N
MAHESHWARi
https://www.slideshare.net/KienWah/accounting-
concepts
https://www.accountingtools.com/articles/ basic-
accounting-concepts