Resource Description


  • Business entity concept states owner and business are two different entities in the eye of law
  • Money measurement concept states only financial transactions need to be recorded in the books of accounts.
  • Going concern concept states that business will continue to operate for an indefinite period of  time
  • Cost concept states assets will be recorded in the books at cost price though it’s market value will change with passage of time.
  • Dual Aspect concept states that every transaction has two fold effects and double entry system of book keeping has to be followed while recording the transactions.
  • Periodicity concept states the whole life of business is divided into different accounting periods say for example one year period to facilitate preparation of financial statements.
  • Matching concept states expenses relating to particular period are to be matched with revenues relating to that period.
  • Realisation concept which states that revenue is recognized to be earned on the date on which it is realized.
  •  Objective evidence concept states that every transaction should be supported by a reliable evidence to avoid frauds.
  • According to accrual concept, the effects of the transactions are recognised on mercantile basis, i.e., when they occur and not when cash is paid or received.


  • Convention of consistency states that accounting rules and procedures should be  followed consistently  year after  year to facilitate comparison.
  • Convention of full disclosure implies that the accounts must be prepared honestly and all material information should be disclosed in the accounting statement.
  • Convention of materiality states that all material transactions have to be disclosed in financial statements.  Whether a transaction is material or immaterial depends according to size of the organization.
  • Convention of conservatism states  – provide for probable losses though not for probable gains.

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