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Accounting
1. Accounting Principles
Accounting principles are the rule of actions
adopted while recording business transactions
which will ensure the uniformity , clarity and
understanding of business.
The accounting principles are mainly classified
in to two categories . They are Accounting
Concept and Accounting Conventions.
2.
3. Accounting Concept
Accounting concept are basic assumptions or
conditions which the accounting system is based .
The important accounting concepts are given below.
Business Entity Concept
Going Concern Concept
Dual Aspect Concept
Cost Concept
Money Measurement Concept
Realization Concept
Accrual Concept
Matching Concept
4. Business Entity Concept
Business entity concept states that business
and business man are two separate entity .
Under this business is treated as a separate unit
distinct from its owner. The transactions
between the proprietor and the business will be
recorded separately in the books of business
and shown separately under the heading
“Capital amount”.
5. Going Concern Concept
It is assumed that the entity is a going concern,
it will continue to operate for an indefinitely long
period in future and transactions are recorded
from this point of view.
6. Dual Aspect Concept
Under this concept each business transaction
has two aspects they are receiving aspects and
giving aspects. The receiving aspect is known
as Debit aspect and the giving aspect is known
as Credit aspect of the business.
7. Cost Concept
Cost Concept is based on the Going Concern
Concept. According to this concept, assets
purchased will be entered in the business book
as per the cost price in which they are
purchased and this will be the base for further
accounting of assets.
8. Money Measurement Concept
This concept states that, the transactions which
will treat only in the terms of money.
Realization Concept
According to this concept Revenue is
recognized only when the sale is made.
Matching Concept
This matches the cost along with the
revenue.
9. Accounting Conventions
This is method or custom in which the
accountants are following for the preparation of
accounting statements . This includes mainly
three types of conventions . They are as
follows:-
Convention of conservatism
Convention of consistency
Convention of material Disclosure
10. Convention of conservatism
The principle of conservatism gives guidance on
how to record uncertain events and estimates .
The principle of conservatism states that you
should always error on the most conservative
side of any transaction. Most of the time this
means minimizing profits by recording uncertain
losses or expenses and not recording uncertain
or estimated gains.
11. Convention of consistency
The accounting practices and methods should
remain consistent from one accounting period to
another.
Whatever accounting practice is followed by
business enterprise , should be followed on a
consistent basis from year to year.
12. Convention of Disclosure
Financial Statements and their notes should
present all information that is relevant and
material to the user’s understanding of the
statements.
13. Financial Statements
Companies prepare four financial statements.
1-Income Statement
2-Owner’s Equity Statement
3-Balance sheet
4-Statement of cash flows
14. Income Statement
Reports the revenues and expenses for the
specific period of time.
Lists revenues first, followed by expenses.
Shows net income(or net loss).
15. Owners Equity Statement
Reports the changes in owners equity for a
specific period of time.
The time period is the same as that covered by
the income statement.
16. Balance Sheet
Reports the assets , liabilities and owners equity
at specific date.
Lists assets at the top, followed by liabilities and
owners equity.
Total assets must equal total liabilities and
owners equity.
17. Statement of cash flows
Information for the specific period of time.
18. Financial Statement of coca cola
Coca cola is an American carbonated soft
drink . It was invented in Georgia, which
is a state of the United states of America.
It was invented by John Pemberton in
1886. Although the recipe of coke is
unknown, the main two ingredients found
in it are coca leaves coca nuts. Coca cola
is not famous in America but it is also
famous throughout the entire world.
