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...   Website :- www.eactclasses.com Telegram: @eactclasses2 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... #ACCOUNTING #JKSSB #FAA 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 13 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.