Accounting Concepts

हिन्दी में पढ़ें:

Accounting plays a very important role in any organization because with its help the transactions taking place in the organization are managed but while managing the transactions some rules are followed so that the transactions can be managed in a systematic manner and these rules are based on accounting concepts. Following the accounting concepts is not compulsory but it helps in following the accounting standards. Note: Law may affect it.

Accounting concepts are also known as accounting assumptions and include business entity concept, money measurement concept, dual aspect concept, matching concept, accounting period concept, cost concept, revenue recognition concept, accrual concept, going concern concept, etc.

Accounting Concepts

Following are the accounting concepts:

1. Business Entity Concept:

According to this concept, the business and its owner are separate from each other, whether it is a sole proprietorship business or a partnership firm, although according to the law, the owner and the business are not separate in every business form. Due to this concept, the investment made by the owner of the business is considered as the liability of the business and is shown on the liability side in the balance sheet.

2. Money Measurement Concept:

This concept tells that all the financial transactions taking place in the business should be measured in money so that the management of transactions is easy. For example, if there is a pen, then it should be measured in money like 5 rupees, 10 rupees, etc. This concept also tells that the things that cannot be measured in money should not be recorded in the accounting books like honesty, loyalty, etc.

3. Dual Aspect Concept:

According to this concept, every transaction is recorded in the books by dividing it into two parts, one part is debit and the other is credit. For example, in a cash purchase transaction, the purchase account is debited, and the cash account is credited. Which account will be credited, and which will be debited depends on the rule of debit and credit. The accounting equation is based on this concept.

4. Matching Concept:

This concept states that revenue should be matched with expenses. For example, if revenue is taken for one year, then expenses should also be taken for one year. By doing this, the actual profit or loss can be ascertained. If revenue is taken more and expenditure is taken less, or vice versa, then the actual profit or loss will not be ascertained.

5. Accounting Period Concept:

This concept states that accounting work should be done on a period basis or there should be a period of accounting. For example, in India, the accounting period is from April to March. By doing this the work related to accounting gets divided which makes it easier to do the accounting work.

India – April to March
Australia – July to June
USA – October to September
China – January to December

6. Cost Concept:

According to this concept, the assets purchased in the business should be recorded at the purchase price and not at any other price. The purchase price also includes transportation costs, installation costs, and other related costs. According to this concept, the market price or actual price is not considered, and the cost of the asset (excluding depreciation/appreciation) remains the same.

7. Revenue Recognition Concept:

This concept states that revenue will be recognized only when the transaction is complete. For example, revenue will be recognized when the ownership of the product is transferred or the sale is completed. If the payment is taken in advance but the ownership is not transferred or the sale is not completed, then revenue will not be recognized in this situation.

8. Accrual Concept:

This concept states that a transaction should be recorded when it occurs, whether it is a cash transaction or a credit transaction. For example, if a sale is made on 05.10.2024 and the payment is received on 06.10.2024, then in this case the sale will be recorded on 05.10.2024 and not on 06.10.2024.

9. Going Concern Concept:

This concept states that accounting in any business should be done with the assumption that the business will continue to run for a long time unless there is concrete evidence that the business will close down in the near future. By assuming this, the proper accounting can be used.

Note: Not all the concepts of accounting are mentioned above.

Read Also:

• What is Accounting? Meaning, Features, and More.
• Process of Accounting
• Advantages and Disadvantages of Accounting
• What is the Accrual Basis of Accounting? Meaning, Features, and more.
• What is the Cash Basis of Accounting? Meaning, Features, and More.
• What is Hybrid Basis of Accounting? Meaning, Features and More.

QNA/FAQ