PPT - Basic Accounting Concepts and Conventions | Accountancy and Financial Management - B Com PDF Download

 Page 1


Accounting concepts 
and conventions
Page 2


Accounting concepts 
and conventions
ACCOUNTING   CONCEPTS
? Business entity concept
? Money measurement concept
? Going concern concept
? Accounting period concept
? Accounting cost concept
? Dual aspect concept
? Matching concept
? Realisation concept
? Accrual concept
Page 3


Accounting concepts 
and conventions
ACCOUNTING   CONCEPTS
? Business entity concept
? Money measurement concept
? Going concern concept
? Accounting period concept
? Accounting cost concept
? Dual aspect concept
? Matching concept
? Realisation concept
? Accrual concept
ACCOUNTING CONCEPTS
? Accounting concepts define the 
assumptions on the basis of which 
financial statements of a business 
entity are prepared.
? Concepts are those basic 
assumptions and condition  which 
form the basis upon which the 
accountancy has been laid.
Page 4


Accounting concepts 
and conventions
ACCOUNTING   CONCEPTS
? Business entity concept
? Money measurement concept
? Going concern concept
? Accounting period concept
? Accounting cost concept
? Dual aspect concept
? Matching concept
? Realisation concept
? Accrual concept
ACCOUNTING CONCEPTS
? Accounting concepts define the 
assumptions on the basis of which 
financial statements of a business 
entity are prepared.
? Concepts are those basic 
assumptions and condition  which 
form the basis upon which the 
accountancy has been laid.
Business entity concept
This concept assumes that, for accounting purposes, the 
business enterprise and its owners are two separate 
independent entities. Thus, the business and personal 
transactions of its owner are separate. For example, when 
the owner invests money in the business, it is recorded as 
liability of the business to the owner. Similarly, when the 
owner takes away from the business cash/goods for 
his/her personal use, it is not treated as business expense.
Page 5


Accounting concepts 
and conventions
ACCOUNTING   CONCEPTS
? Business entity concept
? Money measurement concept
? Going concern concept
? Accounting period concept
? Accounting cost concept
? Dual aspect concept
? Matching concept
? Realisation concept
? Accrual concept
ACCOUNTING CONCEPTS
? Accounting concepts define the 
assumptions on the basis of which 
financial statements of a business 
entity are prepared.
? Concepts are those basic 
assumptions and condition  which 
form the basis upon which the 
accountancy has been laid.
Business entity concept
This concept assumes that, for accounting purposes, the 
business enterprise and its owners are two separate 
independent entities. Thus, the business and personal 
transactions of its owner are separate. For example, when 
the owner invests money in the business, it is recorded as 
liability of the business to the owner. Similarly, when the 
owner takes away from the business cash/goods for 
his/her personal use, it is not treated as business expense.
Money measurement concept
? This concept assumes that all business transactions must be in 
terms of money, that is in the currency of a country. In our 
country such transactions are in terms of rupees. Thus, as per 
the money measurement concept, transactions which can be 
expressed in terms of money are recorded in the books of 
accounts. For example, sale of goods worth Rs.200000, Rent 
Paid Rs.10000 etc. are expressed in terms of money, and so they 
are recorded in the books of accounts. But the transactions 
which cannot be expressed in monetary terms are not recorded 
in the books of accounts.
? For example, sincerity, loyality  are not recorded in books of 
accounts because these cannot be measured in terms of money 
although they do affect the profits and losses of the business 
concern.