What are the Bank account Concepts?

In order to maintain uniformity and consistency in preparing and maintaining ebooks of accounts, Certain rules or rules have been developed. These rules/principles are grouped as principles and exhibitions. These are fundamentals of planning and maintaining accounting data.

" Accounting concept refers to the basic presumptions and guidelines and guidelines which act as the basis of recording of business transactions and preparing accounts. ”

Business Entity Concept

Cash Measurement Concept

Going Idea

Accrual Strategy

Accounting Cost Concept

Corresponding Concept

Accounting Period Strategy

Business Organization Concept

This concept assumes that, for accounting purposes, the company enterprise as well as owners are two individual independent organizations. Thus, the business enterprise and personal ventures of it is owner will be separate.

For example , when the owner invests money in the business, it really is recorded since liability from the Business towards the owner. In the same way, when the owner takes away through the business cash/goods for his/her personal work with, it is not treated as organization expense.

Case in point

Suppose Mr. A began business investment Rs100000. He purchased products for Rs40000, Furniture for Rs20000 and plant and machinery of Rs30000. Rs10000 remains in hand. These are the assets of the business but not of the owner. According to the business entity Principle Rs100000 will probably be treated by business because capital we. e. a liability of business towards owner in the business.

This points emphasize the significance of business entity concept:

This concept helps in ascertaining the profit of the business while only the Organization expenses and revenues will be recorded and everything the non-public and Personal expenses are overlooked.

These principle restraints accountants from recording of user's private/personal transactions.

It also facilitates the recording and reporting of business deals from the organization point of view

Is it doesn't very foundation accounting concepts, conventions and principles.

Money Measurement Principle

This concept presumes that all business transactions should be in terms of money that is inside the currency of the country. Within our country such transactions are in terms of rupees.


Sale of goods worth Rs. 200000, purchase of raw materials Rs. 100000, Lease Paid Rs. 10000 and so forth are portrayed in terms of money, and so they happen to be recorded inside the books of accounts. But the transactions which cannot be expressed in financial terms are generally not recorded inside the books of Accounts. For instance , sincerity, commitment, honesty of employees are certainly not recorded in books of accounts because these can not be measured in terms of money although they do affect the profits and losses from the business matter.

The following points highlight the value of money dimension concept:

Idea guides accountants what to record and what not to record.

It helps in recording business transactions consistently.

If every one of the business orders are stated in economic terms, it will be straightforward to understand the accounts made by the business organization.

It makes it possible for comparison of organization performance of two diverse periods of the identical firm or perhaps of the two different businesses for the same period.

Going Idea

This concept declares that a organization firm can continue to keep on its activities for an imprecise period of time.


A company buys a plant and equipment of Rs. 100000 and its life span is definitely 10 years. In respect to this idea every year several amount will probably be shown while expenses as well as the balance quantity as a property. Thus, if an amount is definitely spent on an item which will be employed in business for many years, it will not be proper to charge the amount in the revenues from the year when the Item can be acquired. Simply a part of the worth is displayed as price in the year of purchase and the remaining equilibrium is shown as a great...



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