Conservatism Concept in Accounting

Conservatism Concept in Accounting

The concept of conservatism also known as prudence concept states that the business should report all the possible losses even if the chances are remote of its occurrence but the gains should only be accounted if they are realized i.e., the assets and the revenue should be recorded in the books of accounts when it becomes certain that they will be received but the expenses and liabilities have to be reported even in the case of uncertainty. Explanation with example:…

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Cost Concept in Accounting

Cost Concept in Accounting

The cost concept states that all the transactions of the business should be recorded at their historical cost in the books of accounts of the business where the cost includes acquisition cost, transportation cost, installation cost and other costs that is incurred while making the asset usable. Explanation with Example: The cost concept clarifies that any asset, liability, purchase of goods or any other business transaction shall be initially recorded at the original cost price rather than the market value…

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Accounting Period Concept in Accounting

Accounting Period Concept in Accounting

Accounting period is the time duration for which the financial statements of the business are prepared to measure the performance of the business done during that period of time, so that the useful information about the business position can be made available to the users after regular interval and generally a period of 1 year/12 months is considered to be an accounting period. Explanation and Example: The accounting period concept helps the business to divide the whole tenure of business…

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Matching Concept in Accounting

Matching Concept in Accounting

Matching concept refers to the concept in accountancy which states that the related expenses of the organization should be booked in the same period when the revenue earned by incurring such expenses is recorded i.e., it focuses on matching revenues earned in an accounting year with the expenses incurred in same accounting year. The purpose of such matching principle is to avoid misstatement of earnings of any accounting period. Explanation: The matching concept directs that the all the related expenses…

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Money Measurement Concept

Money Measurement Concept

The money measurement concept is the concept that says that only those business transactions that can be expressed in terms of money should be recorded in the books of accounts and not the ones that are non-monetary in nature such as sale and purchase of goods, purchase of fixed assets etc. Explanation with example: The money measurement concept provides the clarity to the business entities about the fact that only those transactions that can be measured and estimated in terms…

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Business Entity Concept

Business Entity Concept

The business entity concept states that the business entity has a separate legal identity from its owners that means that the business entity and the owner of the business are not considered same person in the eyes of law and the accounting for the business entity is done separately from those of its owners. Explanation with Examples: As per the business entity concept, the business owners and the business owned by them are two different persons in the eyes of…

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Quick Rules For Share Market To Be PRO Player

Quick Rules For Share Market To Be PRO Player

It is correct to say that the stock market is witnessing one of the most uncertain time from an investor point of view. It is getting difficult for them to judge how long this uncertainty on account of current pandemic and its post impact will remain in market. I believe this uncertainty will increase further and therefore putting the rules of share market which I follow while investing or divesting in stock market which an investor may follow at their…

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Generally accepted Accounting principles (GAAP)

Generally accepted Accounting principles (GAAP)

To maintain the consistency and uniformity while preparing and presenting the financial statements of the entity, certain principles have been developed which are called as concepts, conventions, principles, assumptions, postulates etc. and these all are considered to be the theory base of accounting.  The term ‘principle’ has been defined by AICPA as ‘A general law or rule adopted or professed as a guide to action, a settled ground or basis of conductor practice.’  Advantages of Generally accepted accounting principles:  These…

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Accounting Standards

Accounting Standards

Accounting standards are the written guidelines or policies prescribed by the government with the help of regulatory bodies like Ministry of corporate affairs(MCA) in consultation with National Financial Reporting Authority (NFRA) covering the aspects related to the accounting of transaction in the financial statements of business namely recognition, measurement, presentation & disclosure of accounting transaction. Explanation: The accounting standards are the written documents that cover following aspects: 1. Recognition of the transaction & events 2. Measurement of the recognized transactions…

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Basic Accounting Terms

Basic Accounting Terms

Some of the basic accounting terms are as follows:  1. Business: Business is defined as any activity that is started for earning profits/ income. These activities mainly involve the supply of goods or service by the owners of the business in exchange of money. For example nearby stores of groceries, supermarkets, stationery shops etc.  2. Event:  Event refers to any activity that happens in the business while doing day to day operations. These activities may or may not involve money. For example…

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