Accounting Concepts...

While making accounting statements a clear objective is that accounts reflect true and fair view. The true and fair view is applied to ensuring business activites are carring out properly. to ensure this application there are certain concepts and conventions which helps that accounts are maintained accurately. Different accounting concepts are as follows:



The Separate Entity concept: This means that the business is treated as a separate entity.i:e The business transactions are recorded separately and distinct from the personal transactions of the owner. 



Matching concept: Income and expenses are properly matched with a given accounting period i:e to which they relate.


Historical cost concept: According to the historical cost concept assets and liabilities are recorded at their historical cost. Historical cost means the cost that was initially paid for the acquisition of an asset, e.g. cost of an asset.


Going concern concept: An entity is a going concern if it has an intention to cease trading or shut off its operations nor The circumstances that may lead to the shutting off of the entity’s operations.
An entity should prepare its financial statements on going concern basis if it is to continue its operations in the near future.


Prudence concept: The prudence concept reveals that assets and incomes are not overstated, and liabilities and expenses are not understated.


Materiality concept: This implies that an information is material if its omission or misstatement in the financial statements may affect the decisions of the users of the financial statements.


Consistency concept: This means that accounting principles and policies shall be applied on a consistency basis from one period to another period.