Accounting Concepts
• Concept- idea which has universal application
• Assumptions and perceptions which form the base
Entity Concept
1. Separate entity
2. Distinct from owner
3. Business and personal transactions are treated differently
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Accounting Concepts. • Concept- idea which has universal application. • Assumptions and perceptions which form the base. Entity Concept. 1. Separate entity.
Typology: Lecture notes
2021/2022
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Accounting Concepts
- Concept- idea which has universal application
- Assumptions and perceptions which form the base
Entity Concept
- Separate entity
- Distinct from owner
- Business and personal transactions are treated differently
Money Measurement Concept
- Money – medium of exchange
- Transactions-measured-in terms of money
- Suffers from few limitations, Ex: ignores purchasing power of money
Periodicity Concept
- For performance measurement
- Small period of time
- Can be 1 year or 6 months etc
- Usually- either calendar year (Jan to Dec) or financial year is considered (1st^ April to 31 st^ march)
Mercantile basis?????
Double entry system - recording transactions as and when they occur
Right to receive - income when earned
Duty to pay - expense when incurred
Matching Concept
Revenue = Expense (need not be 100% match) (For one period) Ex: purchase of Raw materials for selling goods
- Periodicity decides the period
- Matching tells which income and expenses to take Periodic profit = periodic income – periodic expense
Going concern Concept
- Assumption – business will continue till foreseeable future
- Basis for valuation of assets
- Informative to stakeholders /users
Dual Aspect Concept
Core of double entry system Ex: Purchase of a machine
- Money
- Machine Every transaction has two aspects - Debit and credit Ex: Sale of goods
- Money
- Machine