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- 1Transactionmean ‘a business, performance of an act, an agreement’
- 2eventmean ‘a happening, as a consequence of transaction(s), a result.’
- 3The Committee on Terminology set up by the American Institute of Certified Public Accountants formulated the following definition of accounting in 1961:: Accounting“Accounting is the art of recording, classifying, and summarising in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the result thereof.”
- 4Generally Accepted Accounting Principles’ (GAAPs)term GAAPs is used to describe rules developed for the preparation of the financial statements and are called concepts, conventions, postulates, principles etc.
- 5The word concept meansidea or notion, which has universal application.
- 6basis of which the accounting principles are formulated.accounting concepts
- 7accounting principles“Accounting principles are a body of doctrines commonly associated with the theory and procedures of accounting serving as an explanation of current practices and as a guide for selection of conventions or procedures where alternatives exist.”
- 8Entity concept:Entity concept states that business enterprise is a separate identity apart from its owner. Accountants should treat a business as distinct from its owner.
- 9Money measurement concept:As per this concept, only those transactions, which can be measured in terms of money are recorded
- 10Periodicity concept / concept of definite accounting periodAccording to this concept accounts should be prepared after every period & not at the end of the life of the entity.
- 11Accrual concept:Under accrual concept, the effects of transactions and other events are recognised on mercantile basis i.e., when they occur (and not as cash or a cash equivalent is received or paid) and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate.
- 12Matching concept:In this concept, all expenses matched with the revenue of that period should only be taken into consideration.
- 13Revenue – Expenses =Profit
- 14Periodic Profit= Periodic Revenue – Matched Expenses
- 15Going Concern conceptThe financial statements are normally prepared on the assumption that an enterprise is a going concern and will continue in operation for the foreseeable future.
- 16Cost concept:By this concept, the value of an asset is to be determined on the basis of historical cost, in other words, acquisition cost.
- 17Realisation concept:Any change in value of an asset is to be recorded only when the business realises it.
- 18Dual aspect concept:Every transaction or event has two aspects
- 19Conservatism:Conservatism states that the accountant should not anticipate any future income however they should provide for all possible losses.
- 20Consistency:the accounting policies are followed consistently from one period to another; a change in an accounting policy is made only in certain exceptional circumstances.
- 21An enterprise should change its accounting policy in any of the following circumstances only:a. To bring the books of accounts in accordance with the issued Accounting Standards.
b. To comply with the provision of law.
c. When under changed circumstances it is felt that new method will reflect more true and fair picture - 22Materiality:According to materiality principle, all items having significant economic effect on business of enterprise should be disclosed in financial statements and any insignificant item which will only increase the work of accountant but will not be relevant to users’ need should not be disclosed in financial statements.
- 23FUNDAMENTAL ACCOUNTING ASSUMPTIONS(i) Going Concern
(ii) Consistency
(iii) Accrual - 24CONSIDERATIONS IN DETERMINING CAPITAL AND REVENUE EXPENDITURESPREM Nager
P- Purpose of expenses:
R- Recurring nature of expenditure:
E- Effect on revenue generating capacity of business:
M- Materiality of the amount involved:
N- nature of business - 25—
Información
- Descripción
- accounting terminologies
- Creado por
- Vijaya Raikode · ago 2021
- Actualizado
- 27 ago 2021
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