Professional Documents
Culture Documents
This communicates the results of analysis and interpretation to the management or to the
concerned party.
To ensure necessary control over the operation as well as the resources of the business.
Accounting Principles
Accounting principles are the norms or rule of actions adopted while recording business
transactions which will ensure the uniformity, clarity and understanding of business. The
accounting principles are mainly classified in to two categories. They are Accounting Concepts
and Accounting Conventions.
1. Accounting Concepts
Accounting concepts are basic assumptions or conditions which the accounting system is
based. The important accounting concepts are Business Entity Concept, Going Concern concept,
Dual Aspect Concept, Cost Concept, Money measurement Concept, Realization Concept,
Accrual Concept and matching Concept.
Business Entity Concept- Business entity concept states that the business and business
man are two separate entity. Under this, business is treated as a separate unit distinct from
its owner. The transactions between the proprietor and the business will be recorded
separately in the books of business and shown separately under the heading 'Capital
account'.
Going Concern concept- As per this concept business unit has a perpetual succession or
a continued existence and the transactions are are recorded from the point of view. The
concept says that the business will continue in operation long enough to charge the cost
of fixed assets over the useful life time against the income from business.
Dual Aspect Concept- Under this concept each business transaction has two aspects
they are receiving aspects and giving aspects. The receiving aspect is known as Debit
aspect and the giving aspect is known as the Credit aspect of the business.
Cost Concept- Cost Concept is based on the Going concern concept. According to this
concept, assets purchased will be entered in the business book as per the cost price in
which they are purchased and this will be the base for further accounting of assets.
Money measurement Concept- This concepts states that, the transactions which will
treat only in the terms of money.
Matching Concept- This matches the cost along with the revenue.
2. Accounting Conventions
This is method or custom in which the accountants are following for the preparation of
accounting statements. This includes mainly three types of conventions. They are as follows:
Convention of conservatism
Convention of consistency