According to this concept, while calculating the profits during the accounting period in a correct manner, all the expenses and costs incurred during the period, whether paid or not, should be matched with the income generated during the period.
2. What is Money Measurement Concept?
According to this concept, only those transactions find place in the accounting records, which can be expressed in terms of money. This is the major drawback of financial accounting and financial statements.
According to this concept, an asset is recorded at the cost at which it is acquired instead of taking current market prices of various assets.
4. What is Accounting Period Concept?
According to this concept, the indefinite period of time is divided into shorter time periods, each one being in the form of Accounting period, in order to facilitate the preparation of financial statements on periodical basis. Selection of accounting period depends on characteristics like business organization, statutory requirements etc.
5. What is Going Concern Concept?
According to this concept, the organization is going to be in existence for an indefinite period of time and is not likely to close down the business in the shorter period of time. This affects the valuation of assets and liabilities.
6. What is Dual Aspect Concept?
According to this concept, every transaction has two affects. This basic relationship between assets and liabilities which means that the assets are equal to the liabilities remains the same.
7. What is Business Entity Concept?
According to this concept, the business has a separate legal identity than the person who owns the business. The accounting process is carried out for the business and not for the person who is carrying out the business. This concept is applicable to both, corporate and non corporate organizations.
8. Explain accounting concepts?
Accounting concepts are those basis assumptions upon which basic process of accounting is based. Following are the basic accounting concepts:
1) Business Entity Concept
2) Dual Aspect Concept
3) Going Concern Concept
4) Accounting Period
5) Concept Cost Concept
6) Money Measurement Concept
7) Matching Concept
9. What is Convention of Consistency?
This accounting convention proposes that the same accounting principles, procedures and policies should be used consistently on a period to period basis for preparing financial statements to facilitate comparison of financial statements on period to period basis. If any changes are made in the accounting procedures or policies, then it should be disclosed explicitly while preparing the financial statements.
10. What is Convention of Materiality?
This accounting convention proposed that while accounting only those transactions will be considered which have material impact on financial status of the organization and other transactions which have insignificant effect will be ignored.. It gives relative importance to an item or event.
