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4. Going Concern Concept: - It is assumed that business will continue for a long
time. With this assumption fixed assets are recorded in the books of their original
cost. Keeping this assumption in view prepaid expenses or not treated as expenses
of the year in which they are incurred.
5. Objective Evidence Concept: - According to this concept all accounting
transactions should be evidenced and supported by objective documents. The
documents include invoices receipts, cash memos etc.
unbiased, they are not affected by personal judgements in recording these events.
6. Cost Concept: - Usually all the transactions will be recorded at cost in the books.
However at the end of the every year the accountant shows the reduced value of the
assets after providing for depreciation.
7. Accounting Period Concept: - Accounting period is the period following the
business concerns to maintaining accounts to known profits or loss usually one year,
it will be the accounting period starting from the 1 st April and ending at 31st March
every year.
8. Accrual Concept: - The accrual system use a method where by revenues and
expenses are identified with specific period of time like a month, quarter year, half
year or year. It implies recording of revenues and expenses of the particular
accounting period. The excess of revenues over expenses is income and the excess
of expenses over revenues is loss.
9. Matching Cost Concept: - According to these principles the expenses incurred in
an accounting period should be matched with the revenues recognised in that period.
10. Historical Record Concept: - The accountant shows only the transactions which
have actually taken place and not those which may take place in future. All
transactions in accounting are to be recorded in the books of chronological order, this
means the preparation of a historical record for all transactions. Hence this concept is
called as historical record concept.
II. Conventions: 1. Fully Disclosure Concept: - This concept deals with the convention that all
information which is of material importance should be disclosed in the accounting
statements. The accounting reports should disclose fully and fair information to the
Proprietors, Creditors, investors and others.
2. Materiality Concept: - Under this concept the trader records important facts about
commercial activities in the form of financial statements if any unimportant
information is to be given for the sake of clarity.
a. Planning.
b. Decision making.
c. Coordinating.
d. Controlling.
e. Communicating.
f. Interpreting.
UNIT II
Double Entry System: - It is a scientific way of presenting A/cs. As such all the
business concerns feel it convenient to prepare the accounts under double entry
system. The taxation authorities also compel the businessmen to prepare the A/cs
under Double Entry System. Every business transaction has got two A/cs, one is
debited and the other one is credited. The principle of double entry is based on the
fact that there can be no giving without receiving nor can there be receiving without
something giving. The receiving A/c is debited on the debited side of A/c and the
giving is credited on the credit side of A/c.
Advantages: 1. Scientific system.
2. Full information.
3. Assessment of P&L.
4. Knowledge of debtors.
5. Knowledge of creditors.
6. Arithmetical accuracy.
7. Assessment of financial position.
8. Comparison of results.
9. Maintenance according to tax rules.
10. Detection of frauds.
Limitations: 1. Errors of Omission
credited Rs 50 lesser trial balance will tally but mistake will remain in A/cs.
Classification of A/cs: -
Ledger
P.SIDDHARDHA
M.B.A., M.PHIL
ACCOUNTING
FOR MANAGERS