Accounting Concepts | Lecture 3 | JKSSB Finance Accounts Assistant Exam | CA MOHAMAD LATEEF

Accounting Concepts | Lecture 3 | JKSSB Finance Accounts Assistant Exam | CA MOHAMAD LATEEF

Also watch Accounting concept lecture taken separately :    • ACCOUNTING CONCEPTS  - THEORY & MCQ'S | JK...  
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Topics Covered:-
1. Types of Assets & Liabilities.
2. Capital expenditure vs Revenue Expenditure
3. Accounting Concepts:-
i) Business Entity Concept
ii) Going Concern concept
iii) Accounting Period Concept
iv) Matching Concept
v) Money Measurement concept
Vi) Materiality Concept


Link of Book: https://drive.google.com/file/d/10iXL...

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Basic Accounting Concepts
These are the fundamental ideas or basic assumptions on the basis of which accounting is
done. Concepts are those basic assumptions and conditions, which form the basis upon which
the accountancy has been laid. Unlike physical science, accounting concepts are only result
of broad consensus.
Business Entity Concept
The concept of business entity assumes that business has a distinct and separate entity from
its owners. It means that for the purposes of accounting, the business and its owners are to
be treated as two separate entities. Keeping this in view, when a person brings in some money
as capital into his business, in accounting records, it is treated as liability of the business to
the owner. Here, one separate entity (owner) is assumed to be giving money to another distinct
entity (business unit). Similarly, when the owner withdraws any money from the business for
his personal expenses(drawings), it is treated as reduction of the owner’s capital and
consequently a reduction in the liabilities of the business.
Money Measurement Concept
The concept of money measurement states that only those transactions and happenings in
an organisation which can be expressed in terms of money such as sale of goods or payment
of expenses or receipt of income, etc., are to be recorded in the book of accounts. It means
only those transactions will be recorded which can be measured in money. Transactions and
events that can’t be expressed in terms of Money aren’t recorded in the business books.
Going Concern Concept
The concept of going concern assumes that a business firm would continue to carry out its
operations indefinitely, i.e. for a fairly long period of time and would not be liquidated in the
foreseeable future. The financial statements are prepared on the assumption that an
enterprise is a going concern and will continue in operation for the foreseeable future.
The Valuation of Assets of a business entity is dependent on this assumption. Traditionally,
Accountants follow historical cost in majority of the cases.
Accounting Period Concept/Periodicity Concept
Accounting period refers to the span of time at the end of which the financial statements of an
enterprise are prepared, to know whether it has earned profits or incurred losses during that
period and what exactly is the position of its assets and liabilities at the end of that period. The
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financial statements are prepared at regular interval, normally after a period of one year, so
that timely information is made available to the users. This interval of time is called accounting
period. In India, we follow financial year as Accounting Period. E.g., Financial year 2019-20.
It will start on 1st April 2019 and end on 31st March 2020.
Accrual Concept
Under Accrual Concept, the effects of transactions and other events are recognised on
accrual/mercantile basis i.e., when they occur (and not when cash is received or paid). E.g.,
Salary of staff for the month of March will be expense of March though the business may pay
the salary of staff in April. As per Accrual concept: Revenue- Expenses = Profit.
Accrual concept provides the foundation on which the structure of present-day accounting has
been developed.