Definition and Explanation:
Accounting is the language of business through
which economic information is communicated to all
the parties concerned. In order to make this
language easily understandable all over the world,
it is necessary to frame or make certain uniform
standards which are acceptable universally. These
standards are termed as "Accounting Principles".
Accounting
principles may be defined as those rules of action
or conduct which are adopted by the accountants
universally while recording accounting transactions.
They are a body of doctrines commonly associated
with the theory and procedures of accounting. They
are serving as an explanation of current practices
and as a guide for selection of conventions or
procedures where alternatives exist.
These principles
can be classified into two groups.
-
Accounting
concepts
-
Accounting
conventions.
Accounting Concepts:
The term 'concepts'
includes those basic assumptions or conditions on
which the science of accounting is based.
The following are
the important accounting concepts:
- Separate
entity concept
- Going concern
concept
- Money
measurement concept
- Cost concept
- Dual aspect
concept
- Accounting
period concept
- Matching
concept
- Realization
concept
These accounting concepts have been explained in
accounting
concepts article.
Accounting Conventions:
The term
'conventions' includes those customs or traditions
which guide the accountant while communicating the
accounting information.
The following are
the important accounting conventions;
- Convention of
conservatism
- Convention of
full disclosure
- Convention of
consistency
- Convention of
materiality.
These accounting conventions have been
explained in
accounting conventions article. |
