Accounting concept refers to the basic assumptions and rules and principles which work as the basis of recording of business transactions and preparing accounts.
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Accounting concepts refers to the rules of accounting which are to be followed, while recording business transactions and preparing Financial Statements. The Major accounting concepts in IGCSE/O/A-Levels syllabus are:
- Business Entity Concept: The concept assumes that the business enterprise is independent of its owners.
- Money Measurement Concept: As per this concept, only those transaction which can be expressed in monetary terms are recorded in the books of accounts.
- Cost concept: This concept holds that all the assets of the enterprise are recorded in the accounts at their purchase price
- Going Concern Concept: The concept assumes that the business will have a perpetual succession, i.e. it will continue its operations for an indefinite period.
- Dual Aspect Concept: It is the primary rule of accounting, which states that every transaction effects two accounts.
- Realization Concept: As per this concept, revenue should be recorded by the firm only when it is realized.
- Accrual Concept: The concept states that revenue is to be recognized when they become receivable, while expenses should be recognized when they become due for payment.
- Periodicity Concept: The concept says that financial statement should be prepared for every period, i.e. at the end of the financial year.
- Matching Concept: The concept holds that, the revenue for the period, should match the expenses.
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