File Name: account concept and conventions in .zip
Conventions in accounting have been evolved and developed to bring about uniformity in the maintenance of accounts.
- Accounting: Principles, Concepts And Conventions
- ) Sheet 1 - Accounting Concepts Conventions
- Accounting Convention
Notably, accounting concepts and conventions are employed in developing financial statements based on accuracy and consistency. While accounting concepts and conventions have a significant role in processing reliable and realistic financial information, the two terms are different.
Accounting: Principles, Concepts And Conventions
Accounting may be defined as the process of recording, classifying, summarizing and interpreting the financial transactions and communicating the results there of to the persons interested in such information. GAAP Generally Accepted Accounting Principles : It is a Technical concept that describes the basic rules, concepts, conventions and procedures that represent accepted accounting practices at a particular time. The term concept includes those basic assumptions, conditions and ideas upon which the science of accounting is based. Conventions used to signify the customs or traditions as a guide to the preparation of accounting statements. M Grace..
There are a number of conceptual issues that one must understand in order to develop a firm foundation of how accounting works. These basic accounting concepts are as follows:. Accruals concept. Revenue is recognized when earned, and expenses are recognized when assets are consumed. This concept means that a business may recognize revenue, profits and losses in amounts that vary from what would be recognized based on the cash received from customers or when cash is paid to suppliers and employees. Auditors will only certify the financial statements of a business that have been prepared under the accruals concept.
The worldview of accounting and accountants may certainly involve some unhelpful characters poring over formidable figures stacked up in indecipherable columns. Accounting is the language of business efficiently communicated by well-organised and honest professionals called accountants. The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information. The art of recording, classifying, summarising in a significant manner and in terms of money, transactions and events which are, in part at least of financial character, and interpreting the results thereof. Recording every financial transaction is important to a business organisation and its creditors and investors.
) Sheet 1 - Accounting Concepts Conventions
Accounting Concepts and Principles are a set of broad conventions that have been devised to provide a basic framework for financial reporting. As financial reporting involves significant professional judgments by accountants, these concepts and principles ensure that the users of financial information are not mislead by the adoption of accounting policies and practices that go against the spirit of the accountancy profession. Accountants must therefore actively consider whether the accounting treatments adopted are consistent with the accounting concepts and principles. In order to ensure application of the accounting concepts and principles, major accounting standard-setting bodies have incorporated them into their reporting frameworks such as the IASB Framework. In case where application of one accounting concept or principle leads to a conflict with another accounting concept or principle, accountants must consider what is best for the users of the financial information. An example of such a case would be the trade off between relevance and reliability.
Accounting concepts, conventions, assumptions and principles suggest logical and generally accepted accounting treatments and principles. These concepts are not hard and fast rules and should be used as general guidelines in applying and selecting appropriate accounting methods. It is equally important that accounting users should have a basic understanding of the accounting concepts to comprehend financial statements. The accountants must have a through knowledge of these conventions to ensure that accounting information is presented accurately and consistently. Accounting practices should be developed in a way as are consistent with the generally accepted conventions.
Grasp the basic accounting concepts, principles and conventions and observe their implications while recording transactions and events. ◇ Identify the three.
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Basic Accounting Concepts, Conventions, Assumptions and Principles:
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