Current values are difficult to determine. Consistency also states that if a change becomes necessary, the change and its effects on profit or loss and on the financial position of the company should be clearly mentioned. . Expressing in monetary terms also helps in understanding the changes their impact on the value of the resources. This concept as it considers the occurrence of exp. Going Concern Concept:- According to this concept the financial statements are normally prepared on the assumption that an enterprises is a going concern and will continue in operation for the foreseeable future. Similarly depreciation small items like books, calculator is taken as 100% in the year if purchase through used by company for more than one year.
Accounting Conventions and Standards 4. Convention of Disclosure The Companies Act, 1956, prescribed a format in which financial statements must be prepared. Companies having their shares listed on stock exchange publishes their quarterly results. Money Measurement Concept:- As per this concept, only those transactions, which can be measured in terms of money are recorded. Accounting conventions are practices that are generally accepted to be the norm and are not recorded or written down in a formal manner by professional bodies or governing organizations. Under this assumption, revenue and expense recognition may be deferred to a future period, when the company is still operating.
It is entered on the left in an accounting entry. Reliability of financial statements may be lost, if frequent changes are observed in accounting treatment. Under this policy, provisions are made for doubtful debts as well as contingent liability; but we do not consider any anticipatory gain. The American Institute of Certified Public Accountants defines accounting as: The art of recording, classifying, summarising in a significant manner and in terms of money, transactions and events which are, in part at least of financial character, and interpreting the results thereof. A debit is an accounting entry that either increases an asset or expense account, or decreases a liability or equity account.
In other words periodicity concept has also been followed while applying matching concept. R ealization Concept he sale is considered to have taken place only when either the cash is received or some third party becomes legally liable to pay the amount. In here you will get assistance in accounting home and the that we provide has been tailored in such a manner that it can best fit in your budget. An example of such a case would be the trade off between relevance and reliability. Revenues are recognized when earned, and expenses are recognized when assets are consumed.
It requires that working rules once chosen should not be changed arbitrarily and without notice of the effect of change to those who use the accounts. Expressing these items in monetary terms by saying that one has buildings worthRs15 crores, boilers worth Rs 50 lac, cars worth Rs 1 crore and trucks worth¶s 2 crores would make it easier for one to add up these items by adding their monetary values. Any change from one method to another method would result in inconsistency; they may seem to be inconsistent apparently. . Every transaction or event has two aspect. No rise or fall in market price is taken into account.
Convention of Consistency To compare the results of different years, it is necessary that accounting rules, principles, conventions and accounting concepts for similar transactions are followed consistently and continuously. Once a business chooses to use a specific accounting method, it should continue using it on a go-forward basis. There are a number of concepts that have been established as standard accounting principles. No enterprise can prepare its financial statements without considering these concepts. Financial transactions are interpreted in the light of the concepts, which govern accounting methods. Since money in the medium of exchange and the standard of economic value, this concept requires that these transactions alone that are capable of being measured in terms of money be only to be recorded in the books of accounts. Acquisition cost relates to the past i.
Items having an insignificant effect to the user need not to be disclosed. Entity Concept:- Entity Concept says that business enterprises is a separate identity apart from its owner. Similarly depreciation is charged on fixed assets on the same method year after year. In this 66-page summary, we walk through all the important bookkeeping and accounting principles. It is because of this concept that fixed assets are recorded at their original cost and depreciation in a systematic manner without reference to their current realizable value.
Dual aspect Concept:- This concept is the care of double entry book-keeping. A more academic definition of accounting is given by the American Accounting Association: The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information. Capital: A financial asset and its value, such as cash and goods. With the rise of new accounting issues, new financial products, and changes in the financial reporting landscape, new conventions shall be developed. As such, all accounts prepared according to the concepts and conventions are uniform in nature and can be easily used in comparisons and evaluation. It is the assets of the company.
The application of the principles by accountants ensures that financial statements are both informative and reliable. . The principle of consistency plays its role particularly when alternative accounting methods is equally acceptable. Where accounting policies are changed, companies are required to disclose this fact and explain the impact of any change. Accounting conventions may have to be developed to cater to changes in the financial reporting landscape.