BASIC ACCOUNTING CONCEPTS

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ALL ABOUT ACCOUNTING :- 18th BLOG

  ☆☆☆☆☆ ACCOUNTING☆☆☆☆☆

  ★ BASIC ACCOUNTING CONCEPTS :-

In the previous  lesson, You have studied the fields of accounting and principle of accounting.  In order to maintain uniformity and consistency in preparing and maintaining books of accounts, certain rules or principles have been evolved. These rules/ principles are classified as concepts and conventions. These are foundations of preparing and maintaining accounting records in this lesson we shall learn about various accounting concepts and their meaning. 

☆ Explain the term accounting concepts :
Let us take an example. In India 🇮🇳👳 there is a basic rule to be followed by everyone that one 1️⃣ should walk or drive on his/her left hand✋ side of the road 🛣️. It helps in the smooth flow of traffic 🚥. Similarly,  there are certain rules that an accountant should follow while recording business transactions and preparing accounts.  These may be termed as accounting  concepts. Thus, this can be said that: the main concepts is to maintain uniformity and consistency in accounting records. These concepts constitute the very basis of accounting. All the concepts have been developed over the year from experience and thus they are universally accepted rules. Following are the various accounting concepts that have been discussed in the following 9 sections:

* Business entity concept. 

* Money measurement concept. 

* Going concern concept. 

* Accounting period concept. 

* Accounting cost concept. 

* Duality aspect concept. 

* Realisation concept. 

* Accrual concept. 

* Matching concept. 

* Business entity concept :
This concept assumes that, for accounting purposes, the business enterprise and it's owners are two separate independent entities, thus, the business and personal transactions of it's owner are separate, For example,  when the owner invests money💰in the business, it is recorded as liability of the business to the owner. Similarly when the owner takes away from the business cash/goods for his/her personal use, it is not treated as business expense. Thus the accounting records 🔘 are made in the books of accounts from the point of view of the business unit and not the person owning the business. This concept is the very basis of accounting. 
For example :- Suppose Mr. Abc started business with investing of ₹ 25,00,000. He purchased goods for ₹ 2,00,000, furniture and fixtures for ₹ 3,00,000 and plant and machinery of ₹ 15,00,000. ₹ 5,00,000 remains in hand. These are the assets of the business 
and not 🙅 of the owner. According to the business entity concept ₹ 25,00,000 will be treated by business towards the owner of the business. 
             Now he takes away ₹ 1,50,000 cash or goods worth ₹ 1,50,000  for his domestic purposes. This withdrawal of cash or goods by the owner from the business is his private expense of the business. It is treated as drawings. Thus the business entity concept states that business and the owner are two separate or distinct persons. Accordingly, any expenses incurred by owner for himself or his family 👪 from business will be considered as expenses and it will be shown as drawings. 





★Remaining 8 concepts discuss in 19th blog....★ 
                                      
                                       So wait my 19th blog....★

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