Accounting Concepts are the assumptions and conditions on the basis of which financial statements of an entity are prepared. These are the concepts which are adopted by the organizations in the preparation of financial statements to achieve uniformity in reporting. Accounting concepts are the base for the formulation of accounting principles. Accounting concepts have universal application. Here I'm going to discuss some basic details about these concepts.
(1) Entity concept :Entity concept assumes that business Enterprise is separate from its owners. Accounting transactions should be recorded with this concept only. The main intention of this concept is to keep the business transactions keep away from the influence of personal transactions of its owners.
(2) Periodicity Concept :
Periodicity concept assumes a small but workable fraction of time period for measuring the business performance. Generally it assumes 1 year is taken for this purpose.
(3) Money measurement concept :As per this concept transactions which can be measured in monetary terms only are to be recorded in books of accounts. Any transactions which can not be converted into monetary terms should not be recorded in books. Since money is the medium of exchange and unit of measurement for showing the financial performance , it doesn't accept the transactions other than monetary to record in books of accounts.
(4) Accrual concept :
(5) Matching concept :As per this concept all the expenses which can be matched with the revenue of that period only should be taken into consideration for financial reporting. This concept is based on Accrual concept as it gives importance to occurrence of an expense which is spent for generating a revenue. This concept leads to adjustments at the end like outstanding expenses, income and Prepaid expenses , incomes.
(6) Going concern concept :
(7) Cost concept :As per this concept valuation of assets should be done at historical costs/acquisition cost.
(8) Realisation concept :
(9) Dual Aspect concept :This concept is base for double entry Accounting.s of a transaction. Under the system, aspects of transactions are classified into two main types: