Accounting Concepts Definition, Meaning and Example
Accounting Concepts Definition – “Rules of accounting on the basis of which the transactions records in the books of accounts.”
In simple words these are some assumptions or postulates on which the entire accounting system runs. These concepts provide a framework for the businesses or organization for recording their day to day transactions. There are various concepts of accounting. However, here we are going to explain few of them.
Accounting Concepts Example
To get a clear idea about accounting concept definition, let’s have a look over some of the example of principles of accounting.
Business Entity Concept – This concept states that business and owner are two different entities. So the books of accounts are prepare for business perspective not for owner’s perspective . Business is a separate legal entity from its owner.
Dual Aspect – According to this concept, every business transaction has dual aspect that is two aspect. One is debit and second is credit of equal amounts.
Going Entity Concept – This concept assume that, business will run for an indefinite period not for 2 to 3 years. As per this assumption only, accountant records the asset after deducting the depreciation.
Money Measurement Concept – As per this accounting concept, only those transactions records in the books of accounts which are measurable in monetary terms. So, transactions that are not in the money terms does not record.
Cost Concept – According to cost concept of accounting, an asset is recorded in the books of account at the cost in which it is acquired.
Accounting Period Concept – This concept states that the indefinite period of the organization should be divided into intervals in order to measure the performance of the organization after a fixed interval of time.
Realization Concept – As per the concept, in the books of accounts, transactions records when the goods or services get delivers not after receiving the cash.
Verifiable Concept – This concept states that each and every transaction should consist an evidence. For example a sales bill should support a sales transaction.