Main Accounting Concepts
B u s i n e s s E n t i t y Co n c e p t
Let’s say an entrepreneur starts a business. Though he is the owner, the business is treated as a separate entity. It is treated as a distinct feature and therefore it becomes necessary to record the business transactions separately to distinguish from the owner’s personal transactions.
Going Concern Concept
People may come and go, but the business remains forever. Until and unless the business dies by itself.
Money Measurement Concept
Business transactions can only be recorded in terms of their monetary value. Depreciation, rent, use of clerical services etc., can be only added up if expressed in terms of money.
The transactions are recorded keeping in mind the actual cost involved and this concept does not consider the projected value or appreciation. Even if a firm knows that a land purchased for Rs. 2,00,000 will fetch double the amount in the near future or worth more than the actual cost, the transaction is recorded only at the actual cost.
Dual Aspect Concept
Each transaction has two aspects. When a business acquires an asset, it has to pay money. Acquiring an asset and paying money are two sides of the coin. Similarly, if the asset is acquired through credit, there arises a liability to that extent. Thus if there is an increase in asset, there will be increase in liability also. Assets = Liabilities+Capital or Capital = Assets-Liabilities
Unless money has been realized, no transaction can said to have been taken place.
Accounting Period Concept
In order to ascertain the state of the business affairs at regular intervals, usually a period of 52 weeks or 365 days is considered as the accounting period.