CONCEPTUAL FRAME WORK OF ACCOUNTING

K.MATHANKUMAR,

Assistant Professor,

PG and Research Department of Commerce,

C.P.A College,

Bodinayakanur.

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K.MATHANKUMAR, Assistant Professor, PG and Research Department of Commerce, C.P.A College, Bodinayakanur.

INTRODUCATION

Accounting is the language of business. It records business transactions taking place during the accounting period. Accounting communicates the result of the business transactions in the form of final accounts. With a view to make the accounting results understood in the same sense by all interested parties, certain accounting assumptions, concepts and principles have been developed over a course of period.

K.MATHANKUMAR, Assistant Professor, PG and Research Department of Commerce, C.P.A College, Bodinayakanur.

Accounting Entity concept

Owner and business are two different entities

Money measurement concept

Only monetary transactions are recorded

Going concern concept

Business will continue for a foreseeable future

Cost concept

Assets are recorded at cost price

Dual aspect concept

Every transaction has two aspects – debit aspect and credit aspect

Periodicity concept

Accounts are closed at the end of accounting period. It is generally one year

Matching concept

Expenses relating to a particular period are to be matched with revenues relating to that period.

Realisation concept

Revenue should be recorded only when it is realised.

The important accounting concepts and conventions are discussed below

K.MATHANKUMAR, Assistant Professor, PG and Research Department of Commerce, C.P.A College, Bodinayakanur.

Objective evidence concept

Every transaction must have a supporting evidence

Convention of Consistency

Accounting rules and practices should be continuously observed

Convention of Materiality

Relatively important and significant monetary items are to be recorded and disclosed in the financial statements

Accrual concept

Transaction is recorded when it is entered into and not when settlement takes place.

Convention of Full disclosure

Accounts must disclose full and fair information

Convention of Conservatism

While recording transactions, only the prospective losses and not the prospective incomes should be considered

K.MATHANKUMAR, Assistant Professor, PG and Research Department of Commerce, C.P.A College, Bodinayakanur.

THANKING YOU

K.MATHANKUMAR, Assistant Professor, PG and Research Department of Commerce, C.P.A College, Bodinayakanur.