Accounting concepts are the assumptions or ideas which are important for preparation of accounts. Accounting concept refers to the basic assumptions and rules and principles which work as the basis of recording of transactions. Here I will give some brief description about accounting concepts with examples. Accounting concepts constitute the very basis of accounting. It have been developed over the years from experience /practices and thus they are universally accepted rules and preparing accounts. In order to maintain uniformity and consistency in preparing and maintaining books of accounts, certain rules or principles have been evolved. Accounting rules/principles are classified as concepts and conventions. These are the basic important foundations for preparing and maintaining accounting records. Accounting principles are developed for practical purposes. Let we see about accounting concepts.
Basics of Accounting Concepts
It defines the certain assumptions on the basis of which accounts of a business entity are prepared. These are received and accepted in accounting to provide to follow a same structure and internal logic to accounting process.
These are those basis assumption and conditions, which form governs the basis upon which the accountancy has been laid. It lay the foundation on the basis of which the accounting principles are formulated. These are the best possible suggestions based on the practical experience and observation of the profession of accounts. Concepts are adapted to the changing needs and circumstances of business units; it improves information relating to the activities of the business firms. Accounting concepts not governed any law or acts and legislation by government or other authority. It is not legally enforceable.
In simple words, the guidelines to the sound accounting practices. It facilitates and explains the users to understand the financial statements. These are classified on the basis of the aspects of the accounting for which they are useful. Classification of the principles reveals relative importance and their practical use of the accounting process. It helps to identify, measure the events, and record that events to which it is relating to business firm. These applications as they apply to the accounting process and in general practice of a business firms. Some of these may be relevant and required because the business concern is publicly traded and it should be agree with Generally Accepted Accounting Principles/ practices, while small entity can be select and follow any of the basic principles as a best fit for their respective industries or business models. It should be noted that the following list does not contain all concepts of accounting, but the widely used and accepted principles are differs to entities nature. It ensure that the users of financial information are not mislead by the adoption of accounting policies and practices.
Accounting concepts with examples commonly used
1. Entity concept
2. Going concern concept
3. Money measurement concept
4. Dual aspect concept
5. Accounting period concept
6. Cost concept
7. Revenue recognition concept
8. Matching concept
9. Accrual concept
10. Objective evidence concept
Originally posted 2013-10-03 16:33:22.