As we know the process of accounting is that of recording monetary transactions of a business in an organized and transparent form and to prepare financial statements related to assets and liabilities and help in proper functioning of the business. With the help of economic information provided by accounting mangers can make future decisions and predict future trends in the business. Accounting follows set of rules called Generally Accepted Principles of Accounting that are same for each and every business. In this article we are going to define some basic concepts of accounting that are as und
In accounting business is treated as a separate entity that has its own accounts separate from the personal accounts of the owner. Cost is another concept in accounting that means the market values of assets of a company such as building, manufacturing plants and land etc. Another important concept of accounting is that of monetary unit that states that all business transactions are recorded and executed in single currency and exchange rate. Consistency is another concept in accounting that states that accountants must apply same functions and methods to the data over different financial periods. This concept is followed by prudence that shows the real financial position of a company. The next concept of accounting is that of matching that means that all the revenues and expenses incurred in a particular period must be recorded in that period. This concept is followed by accrual accounting that records the revenues that are actually earned by the company in that financial period. Other important concepts of accounting include Going Concern, Realization, Time Period, Full Disclosure and Dual aspect of accounting.
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