BASIC ASSUMPTION CONCEPTS/PRINCIPLES/CONVENTIONS

   BASIC ASSUMPTION CONCEPTS/PRINCIPLES/CONVENTIONS

I. Separate Entity Concept or Entity Concept or business entity concept Business Entity Concept considered business enterprises as a separate Entity & having separate identity distinct from its owner. Therefore business transactions are recorded in the books of accounts from business point of view and not from the owner. Therefore amount invested by owner into the business is also treated as liability (internal) for business.

II. Going Concern Concept :-- According to this concept, it is assumed that enterprise will continue its operation for indefinite period of time. It is assumed that an enterprise neither has intention nor the need to liquidate or wind up and curtail its scale of operation. It is because of this concept a distinction is made between assets and expense, fixed and current assets / liabilities.

III. Money Measurement Concept : -- According to this concept, only those transactions which can be expressed in money should be recorded in the books of accounts . Transactions and events, that cannot be expressed in money are not recorded in books of accounts, even if they are very useful or affect the result of business.

IV. Periodicity Concept/Accounting period concept:-- According to this concept, the life of an enterprise is broken into smaller periods so that its performance can be measured at regular interval. Generally one year period is taken up for performance measurement and appraisal of financial position. So life of the enterprise is divided into smaller periods(usually one year) which is termed as ‘accounting period.’ At the end of accounting period, we prepare financial statements.

V. Accrual Concept:-- Accrual means recognition of revenue and expenses as they are earned or incurred and not when cash or money is received or paid. Revenue means gross inflow of cash, receivables and other consideration arises in the ordinary course of business activities from sale of goods, rendering services and using other enterprises resources yielding interest, royalties and dividends. Expenses are cost relating to revenue earned for a particular period.

VI.Revenue realisation concept:-
this concept speaks about recording of only those transactions which are actually realised. For example, sale will be taken into account only when cash is received or legal ownership is transferred.

VII. Matching concept : For ascertaining profit and loss for a particular period, expenses should be matched with revenue of that period. In financial statement, it is necessary to match revenue of the period with the expenses of that period to determine correct profit or loss.

VIII. Full disclosure concept : as per this concept, all significant information must be disclosed. Accounting data should properly be clarified, summarised, aggregated and explained for the purpose of presenting the financial statements which are useful for the users of accounting information.

IX. Duality concept: according to this concept every transaction has two aspects i.e. the benefit receiving aspect and benefit giving aspect. These two aspects are to be recorded in the books of accounts.

X. Verifiable objective evidence concept: under this concept, accounting data must be verifiable. It means documentary evidence of transactions must be made which are capable of verification by an independent respect.

XI. Historical cost concept : According to this concept, value of asset is determined on the basis of historical cost or acquisition cost or price paid for acquisition of asset.

 

Join COC Education, We provided best video classes for CA/CMA/CS/Class 11th & 12th/ B.com/M.com
Contact us on- 9999631597, 8448322142, 7303445575
Visit YouTube Channel 
http://www.youtube.com/channel/UCzqqr31HSE-B4HcM1Cw4RiQ?sub_confirmation=1
Click Now for Demo Video
https://www.coceducation.com/free-lectures
Join WhatsApp group for your domain course http://whatsapp.conceptonlineclasses.com/

ENROLLED WITH US TODAY AND ENLIGHTEN YOUR CAREER!!!

Related Courses

Related Courses Latest Blogs

Salary of a Qualified CMA

Salary of a Qualified CMA


Why to choose career in "CMA" ?

The Reasons to Choose a Career in "CMA"


What Is Balance ScoreCard

What Is Balance ScoreCard A balanced scorecard is a strategic management performance metric used to identify and improve various internal business functions and their resulting external outcomes. Balanced scorecards are used to measure and provide feedback to organizations. #BalanceScoreCard




Top Reviews

Introduction to Statistics for CA Foundation

Introduction to Statistics for CA Foundation Business Mathematics, Logical Reasoning and Statistics is designed as per latest CA Foundation syllabus for Paper 3 to provide a firm grounding in the principles, techniques and practice. The book adopts self-study approach and has been written in student-friendly manner. With a blend of conceptual learning and problem-solving approach, it offers in-depth understanding of the basic mathematical and statistical tools. #introductiontostatistics


Chapter X of Companies Act 2013

Chapter X of Companies Act 2013 The company shall place the matter relating to such appointment for ratification by members at every annual general meeting. ... Under the Act, the provisions for rotation of auditors in the listed Company & certain other class of Companies, have been provided for. #chapterxofcompaniesact2013


Relevant sections under the Companies Act, 2013 dealing with fraud and false statements

Relevant sections under the Companies Act, 2013 dealing with fraud and false statements The new parent corporate law “The Companies Act 2013” is mostly ... I am limiting my write-up to the provisions to the Act, and I request the readers to refer relevant rules, if any, before ... in the 2013 Act is the Section 447 dealing with “Punishment for fraud”. ... Section 448


What is Corporate Image

What is Corporate Image A corporate identity or corporate image is the manner in which a corporation, firm or business enterprise presents itself to the public. The corporate identity is typically visualized by branding and with the use of trademarks, but it can also include things like product design, advertising, public relations etc #WhatisCorporateImage


What is Energy Audit

What is Energy Audit An energy audit is an inspection survey and an analysis of energy flows for energy conservation in a building. It may include a process or system to reduce the amount of energy input into the system without negatively affecting the output. #whatisenergyaudit