Friday, 9 December 2011

accountingg concepts~ my summary:)

business entity concepts:~ the concept that profit is the difference between revenue and expenses.

goin concern concept:~ assumption/prediction that a business is to continue for a long time.

money measurement concept/monetary concept:~ monetary concept in accounting are acceptable and can obtain general agreement. it is effective and accounting is concerned only with facts measurable in money.

periodicity/accounting period:~ assumption implies that the economic activities of a business can be divided into orbitary time periods, namely, monthly, quarterly or yearly:)

historical cost concept:~ assets are normally shown at cost price.

consistency concepts:~ just remember that in accounting they have their own format/straight line methods that had been adopted. so.. just keep the same method of recording transactions,EXCEPT in SPECIAL CASES. ONLY!!

accrual concept:~ the concept that profit is the difference between revenue and expenses.(both expenses and revenue must be recorded whether they have been paid/received or not)

realization concept:~ this is a concept of profit as being earned at a particular point.( we get profit when the goods are passed to the customer, not when the order for the goods is received).

dual affect concept:~ the concept of dealing with both aspects (A=OE+L) of transaction. which is also well-known as double entry concept:).

materiality concept:~ recording something in a special way only if the amount is not a small one.(transaction that significantly affects the net income report of a business is considered to be material).

prudence/conservatism concepts:~ ensuring that profit/assets are not shown as being too high. ( assets and income should no be overstated and expenses and losses are not understated!)~ 


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