CONTENTSCONTENTS

Accounting Concepts…Accounting Concepts… Meaning… Meaning… Types… Types…

Accounting Conventions…Accounting Conventions… Meaning… Meaning… Types… Types…

Difference B/w Accounting Difference B/w Accounting Concepts & Conventions…Concepts & Conventions…

ACCOUNTING ACCOUNTING CONCEPTS CONCEPTS

In order to make the accounting language In order to make the accounting language convey the same meaning to all people & to convey the same meaning to all people & to

make it more meaningful, most of the make it more meaningful, most of the accountants have agreed on a number of accountants have agreed on a number of concepts which are usually followed for concepts which are usually followed for

preparing the financial statements. These preparing the financial statements. These concepts provide a foundation for accounting concepts provide a foundation for accounting

process. No enterprise can prepare its process. No enterprise can prepare its financial statements without considering financial statements without considering

these concepts.these concepts.

Business is treated as Business is treated as separate & distinct separate & distinct from its membersfrom its members

Separate set of books Separate set of books are prepared.are prepared.

Proprietor is treated Proprietor is treated as creditor of the as creditor of the business.business.

For other business of For other business of proprietor different proprietor different books are prepared.books are prepared.

Business will Business will continue for a long continue for a long period.period.

As per this concept, As per this concept, fixed assets are fixed assets are recorded at their recorded at their original cost & original cost & depreciation is depreciation is charged on these charged on these assets.assets.

Because of this Because of this concept, outside concept, outside parties enter into parties enter into long term contracts long term contracts with the enterprise.with the enterprise.

Assets are recorded Assets are recorded at their original at their original price.price.

This cost serves the This cost serves the basis for further basis for further accounting accounting treatment of the treatment of the asset.asset.

Acquisition cost Acquisition cost relates to the past relates to the past i.e. it is known as i.e. it is known as historical cost.historical cost.

6) DUAL ASPECT 6) DUAL ASPECT CONCEPTCONCEPT

Revenue means the Revenue means the addition to the addition to the capital as a result of capital as a result of business operations.business operations.

Revenue is realized Revenue is realized on three basis-:on three basis-:

1.1. Basis of cashBasis of cash

2.2. Basis of saleBasis of sale

3.3. Basis of productionBasis of production

An accounting convention may be An accounting convention may be defined as a custom or generally defined as a custom or generally

accepted practice which is adopted accepted practice which is adopted either by general agreement or either by general agreement or

common consent among accountants. common consent among accountants.

1) CONVENTION OF 1) CONVENTION OF FULL DICLOSUREFULL DICLOSURE