Post on 05-Apr-2018
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By:Bhawna Dhamija
MBA 1 A
Roll No. : 25
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BASIS ACCOUNTING CONCEPTS ACCOUNTING CONVENTIONS
Nature Accounting concepts are
generally agreed principle
followed by accountant.
Accounting conventions have
no general applicability.
These are flexible, optional
and provides severalalternative practice.
Established By Law Guidelines based upon
customs or usage
Biasness No space for personal biasness inthe adoption . It has uniform
adoption.
Biasness in adoption. It hasno uniform adoption.
Use These are primarily used in
recording, classifying, analyzing
and communicating financial
information of a business.
These are primarily used for
preparing financial
statements
Mandatory by
regulating agency
Accounting concepts are made
mandatory in a specific
accounting standard enforced
by a regulating agency.
Conventions are not
mandatory to be enforced by
any regulating agency.
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Examples of accounting concept:
Separate Entity Concept , Money measurement
concept
Examples of accounting convention:
Convention of full disclosure, conservatism ,consistency , materiality..
To summarize , accounting concepts areassumptions or fundamental proposition onwhich accounting depends and conventions aretraditions or customs that guide in preparingaccounting statements.
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What to match?Expense is to be matched with revenue.
When to match?
Either at the end of the life of business or at theend of each year.
How to measure revenue and expense?
Measurement of Revenue
- Revenue is measured according to accrualconcept.
- Revenue is considered to be earned on its being
realised.
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Measurement of Expense
- Period of recognition (expense being directly
or indirectly associated with revenue of that
period)
- Determination of amount of expense
(traditional approach and replacement
approach )
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