Basic Accounting Concept By. Shivansh Sir

 

BASIC ACCOUNTING CONCEPT

1. Dual Aspect Concept
According to Double Entry System- “Each and Every Transaction has two aspect one of them is Dr. (Debit) And Another Must Be Cr. (Credit). Both Aspect are Always Equal & Opposite”.
“Assets and Liability of the Balance Sheet are always Equal and opposite in Accordance with Dual Aspect Concept”.

Accordingly, Dual Aspect Concept Hold an Accounting Equation which were as Follow-
Capital + Liability=Assets
 
Double Entry System
This is the first book of Double Entry System by Luca Pacioli in Venice (Italy), In Year 1494.
Luca Pacioli is also known as Father of Accounting.

 2. Money Measurement Concept
According to Money Measurement Concept, “All the business transaction are recorded in the terms of money or Monetary term”. “Those transactions which are not capable to express in the term of money are not recorded in the books of Accounts"
Example:- 
1. Human Resources- It is the most important assets of the business but can’t be capable to Express in the term of money.
2. Strike by Employee- It is the Loss of the business but can’t be capable to express in the term of money.

**According Human Resources & Strike by Employees Are not recorded in the Book of Accounts.

3. Business Entity Concept
According to business Entity Concept, there is difference between Business & Businessman because “Business has Separate Legal Entity which is distinct from its Businessman or Owner or Proprietor”. Accordingly, All the transaction are recorded at Business point of view, not a businessman. “Capital is a liability in Accordance with the Business Entity Concept”.

4. Accrual Concept
All Expense are recorded in that Accounting Period in which they occurred whether cash is Paid or Not. Similarly, All Income are also recorded in that According Period in which they Earned whether cash Received or Not. “Accrual Concept helps to Ascertainment of correct net Profit or Loss of the business.”
Example
- O/s Expense will be Added.
- Prepaid Expense will be Subtract.
**Accrual Concept has complete info. About transaction but cash not.
 
5. Going Concern Concept
Going concern concept is one of the accounting principles that states that a business entity will continue running its operations in the foreseeable future and will not be liquidated or forced to discontinue operations for any reason.

In other words, a going concern is expected to have the following things working in their favour:

  1. The business is capable of running the daily operations and has capital and raw materials to do so.
  2. A business has the ability to pay off the debt during the accounting period.
  3. There should be demand in the market for the products or services offered by the company.
  4. There should be no changes in the law governing the business.

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