Dual Aspect Concept – Every Transaction has two effects: Debit and Credit. Both are opposite and equal also known as Double Entry System. Accounting equation has been derived on the basis of dual aspect concept as under: Assets = Liabilities + Equity (Balance Sheet Equation) Net Profit = Income – Expenses (Profit & Loss Equation) Dual […]
Conservatism Concept – Conservatism states that the accountant should not anticipate income and should provide for all possible losses. When there are many alternative values of an asset, an accountant should choose the method which leads to the lesser value. Later on we shall see that the golden rule of current assets valuation – ‘cost or market […]
Cost Concept – By this concept, the value of an asset is to be determined on the basis of historical cost, in other words, acquisition cost. Hence, All the fixed assets are recorded at Historical Cost only and market value of fixed assets is ignored. In accounting, the cost principle is part of the generally accepted […]
Going Concern Concept – The financial statements are normally prepared on the assumption that an enterprise is a going concern and will continue in operation for the foreseeable future. Hence, it is assumed that the enterprise has neither the intention nor the need to liquidate or curtail materially the scale of its operations; if such an […]
Accrual Concept – Accrual means recognition of revenue and costs as they are earned or incurred and not as money is received or paid. Expenses accrue when benefit is received and income is accrued when benefit is given. Accrual Concept in Detailed – Under accrual concept, the effects of transactions and other events are recognised on […]
Money measurement concept – As per this concept, only those transactions, which can be measured in terms of money are recorded. Since money is the medium of exchange and the standard of economic value, this concept requires that those transactions alone that are capable of being measured in terms of money be only to be recorded […]
Tax Audit – The dictionary meaning of the term “audit” is check, review, inspection, etc. There are various types of audits prescribed under different laws like company law requires a company audit, cost accounting law requires a cost audit, etc. The Income-tax Law requires the taxpayer to get the audit of the accounts of his business/profession […]
Entity 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. Business transactions are recorded in the business books of accounts and owner’s transactions in his personal books of accounts. The practice of distinguishing the affairs of the business from […]
Accounting Estimates – Earlier we have learned how to measure a transaction, which had already taken place and for which either some value/money has been paid or some valuation principles are to be adopted for their measurement. But there are certain items, which are not occurred therefore cannot be measured using valuation principles still they are […]
Accounting Policy – Accounting Policies refer to specific accounting principles and methods of applying these principles adopted by the enterprise in the preparation and presentation of financial statements. Accounting policies are the specific principles and procedures implemented by a company’s management team and are used to prepare its financial statements. These include any methods, measurement systems and […]