What are accounting concepts?
Accounting concepts are the basic assumptions or ideas upon which the science of accounting is based. These are the fundamentals of accounting practice. These include: separate entity concept, going concern concept, money measurement concept, cost concept, dual aspect concept, accounting period concept, matching principle realization principle.
What is the separate entity concept?
Separate entity concept state that all business transactions should be recorded in an independent manner, without concern for the owner's personal transactions.
What is the going concern concept?
The going concern concept assumes that the business will continue to operate indefinitely, without an owner or with a new one. The value of long term assets are amortized over their useful life.
What are accounting conventions?
Accounting conventions are the customs and traditions that guide accountants when preparing accounting statements. Some important accounting conventions are: convention of conservatism, convention of consistency, convention of materiality and convention of full disclosure.
What is the convention of conservatism?
The 'Convention of Conservatism' states that a company should make a provision for a doubtful liability only if it can be ascertained with reasonable certainty that such an obligation exists.