Accounting concept

Accounting Concepts and Principles are a set of broad conventions that have been devised to provide a basic framework for financial reporting. As financial reporting involves significant professional judgments by accountants, these concepts and principles ensure that the users of financial information are not mislead by the adoption of accounting policies and practices that go against the spirit of the accountancy profession. Accountants must therefore actively consider whether the accounting treatments adopted are consistent with the accounting concepts and principles. - See more at: http://accounting-simplified.com/financial-accounting/accounting-concepts-and-principles/#sthash.2iFuxnrM.dpuf

Accounting Concepts and Principles are a set of broad conventions that have been devised to provide a basic framework for financial reporting. As financial reporting involves significant professional judgments by accountants, these concepts and principles ensure that the users of financial information are not mislead by the adoption of accounting policies and practices that go against the spirit of the accountancy profession. Accountants must therefore actively consider whether the accounting treatments adopted are consistent with the accounting concepts and principles. - See more at: http://accounting-simplified.com/financial-accounting/accounting-concepts-and-principles/#sthash.2iFuxnrM.dpuf

Accounting Concepts and Principles are a set of broad conventions that have been devised to provide a basic framework for financial reporting. As financial reporting involves significant professional judgments by accountants, these concepts and principles ensure that the users of financial information are not mislead by the adoption of accounting policies and practices that go against the spirit of the accountancy profession. Accountants must therefore actively consider whether the accounting treatments adopted are consistent with the accounting concepts and principles. - See more at: http://accounting-simplified.com/financial-accounting/accounting-concepts-and-principles/#sthash.2iFuxnrM.dpuf

Accounting Concepts and Principles are a set of broad conventions that have been devised to provide a basic framework for financial reporting. As financial reporting involves significant professional judgments by accountants, these concepts and principles ensure that the users of financial information are not mislead by the adoption of accounting policies and practices that go against the spirit of the accountancy profession. Accountants must therefore actively consider whether the accounting treatments adopted are consistent with the accounting concepts and principles. - See more at: http://accounting-simplified.com/financial-accounting/accounting-concepts-and-principles/#sthash.2iFuxnrM.dpuf

Accounting Concepts and Principles are a set of broad conventions that have been devised to provide a basic framework for financial reporting. As financial reporting involves significant professional judgments by accountants, these concepts and principles ensure that the users of financial information are not mislead by the adoption of accounting policies and practices that go against the spirit of the accountancy profession. Accountants must therefore actively consider whether the accounting treatments adopted are consistent with the accounting concepts and principles. - See more at: http://accounting-simplified.com/financial-accounting/accounting-concepts-and-principles/#sthash.2iFuxnrM.dpuf

Accounting Concepts and Principles are a set of broad conventions that have been devised to provide a basic framework for financial reporting. As financial reporting involves significant professional judgments by accountants, these concepts and principles ensure that the users of financial information are not mislead by the adoption of accounting policies and practices that go against the spirit of the accountancy profession. Accountants must therefore actively consider whether the accounting treatments adopted are consistent with the accounting concepts and principles. - See more at: http://accounting-simplified.com/financial-accounting/accounting-concepts-and-principles/#sthash.2iFuxnrM.dpuf

Accounting Concepts and Principles are a set of broad conventions that have been devised to provide a basic framework for financial reporting. As financial reporting involves significant professional judgments by accountants, these concepts and principles ensure that the users of financial information are not mislead by the adoption of accounting policies and practices that go against the spirit of the accountancy profession. Accountants must therefore actively consider whether the accounting treatments adopted are consistent with the accounting concepts and principles. - See more at: http://accounting-simplified.com/financial-accounting/accounting-concepts-and-principles/#sthash.2iFuxnrM.dpuf

Accounting Concepts and Principles are a set of broad conventions that have been devised to provide a basic framework for financial reporting. As financial reporting involves significant professional judgments by accountants, these concepts and principles ensure that the users of financial information are not mislead by the adoption of accounting policies and practices that go against the spirit of the accountancy profession. Accountants must therefore actively consider whether the accounting treatments adopted are consistent with the accounting concepts and principles. - See more at: http://accounting-simplified.com/financial-accounting/accounting-concepts-and-principles/#sthash.2iFuxnrM.dpuf

 There are certain rules that
 an accountant should follow while recording business transactions and
preparing accounts. These may be termed as accounting concept. Thus, this
can be said that :
Accounting concept refers to the basic assumptions and rules and
principles which work as the basis of recording of business transactions and preparing accounts.


(1) Accruals concept: revenue and expenses are recorded when they occur and not when the cash is received or paid out;

(2) Consistency concept: once an accounting method has been chosen, that method should be used unless there is a sound reason to do otherwise;

(3) Going concern: the business entity for which accounts are being prepared is in good condition and will continue to be in business in the foreseeable future;

(4) Prudence concept (also conservation concept): revenue and profits are included in the balance sheet only when they are realized (or there is reasonable 'certainty' of realizing them) but liabilities are included when there is reasonable 'possibility' of incurring them.
Other concepts include

(5) Accounting equation: total assets equal total liabilities plus owners' equity;

(6) Accounting period: financial records pertaining only to a specific period are to be considered in preparing accounts for that period;

(7) Cost basis: asset value recorded in the account books should be the actual cost paid, and not the asset's current market value;

(8) Entity: accounting records reflect the financial activities of a specific business or organization, not of its owners or employees;

(9) Full disclosure: financial statements and their notes should contain all relevant data;

(10) Lower of cost or market value: inventory is valued either at cost or the market value (whichever is lower);

(11) Maintenance of capital: profit can be realized only after capital of the firm has been restored to its original level, or is maintained at a predetermined level;

(12) Matching: transactions affecting both revenues and expenses should be recognized in the same accounting period;

(13) Materiality: minor events may be ignored, but the major ones should be fully disclosed;

(14) Money measurement: the accounting process records only activities that can be expressed in monetary terms (with some exceptions);

(15) Objectivity: financial statements should be based only on verifiable evidence, including an audit trail;

(16) Realization: any change in the market value of an asset or liability is not recognized as a profit or loss until the asset is sold or the liability is paid off;

(17) Unit of measurement: financial data should be recorded with a common unit of measure (dollar, pound sterling, yen, etc.).
Also called accounting conventions, accounting postulates, or accounting principles.