Summary of Accounting Principles and concepts

1.Business Entity: 

This concept assumes that a business has a distinct and separate entity from its owners. Thus, for the purpose of accounting, a business and its owners are to be treated as two separate entities.

2. Money Measurement : 

The concept of money measurement states that only those transactions and happenings in an organisation, which can be expressed in terms of money are to be recorded in the book of accounts. Also, the records of the transactions are to be kept not in the physical units but in the monetary units.

3.Going Concern : 

The concept of going concern assumes that a business firm would continue to carry out its operations indefinitely (for a fairly long period of time) and would not be liquidated in the near future.

4.Accounting Period : 

The accounting period refers to the span of time at the end of which the financial statements of an enterprise are prepared to know whether it has earned profits or incurred losses during that period and what exactly is the position of its assets and liabilities, at the end of that period.

5. Cost Concept : 

The cost concept requires that all assets are recorded in the book of accounts at their cost price, which includes cost of acquisition, transportation, installation and making the asset ready for the use.

6.Dual Aspect : 

This concept states that every transaction has a dual or two-fold effect on various accounts and should therefore be recorded at two places. The duality principle is commonly expressed in terms of fundamental accounting equation, which is :

Assets = Liabilities + Capital

7.Revenue Recognition : 

The concept of revenue recognition requires that the revenue for a business transaction should be considered realised when a legal right to receive it arises.

8.Matching Concept: 

The concept of matching emphasises that expenses incurred in an accounting period should be matched with revenues during that period. It follows from this that the revenue and expenses incurred to earn these revenue must belong to the same accounting period.

9. Full Disclosure : 

This concept requires that all material and relevant facts concerning the financial performance of an enterprise must be fully and completely disclosed in the financial

10. Consistency : 

This concept states that accounting policies and practices followed by enterprises should be uniform and consistent one the period of time so that results are comparable. Comparability results when the same accounting principles are consistently being applied by different enterprises for the period under comparison, or the same firm for a number of periods.

11.Conservatism : 

This concept requires that business transactions should be recorded in such a manner that profits are not overstated. All anticipated losses should be accounted for but all unrealised gains should be ignored.

12.Materiality : 

This concept states that accounting should focus on material facts. If the item is likely to influence the decision of a reasonably prudent investor or creditor, it should be regarded as material, and shown in the financial statements.

13.Objectivity : 

According to this concept, accounting transactions should be recorded in the manner so that it is free from the bias of accountants and others.