Definition of Accounting concepts:
When creating all accounts and financial reports, it is important to follow the rules of accounting. The four basic concepts are: (1) The concept of delimitation: Income and expenses are recorded when they are spent and not when money is received or paid. ()) Concept of consistency: Once the method of accounting is chosen, it should be used, if there is no good reason to work in a different way. ()) Survival: A business entity whose account has been created is in good standing and will continue to do business in the future. ()) Precautionary concept (also the concept of restoration): revenues and profits are included in the balance sheet only when they are realized (or if there is sufficient certainty that they will be achieved), But liabilities are included when someone is reasonable and is likely to cause them.
Other concepts include
(5) Accounting Equation: Total assets are equal to the equation in addition to total assets
()) Accounting period: When preparing financial statements for this period, financial documents referring only to a specific period should also be taken into consideration.
Cost: The value of the assets listed in the ledger should be the actual value paid, not the current value of the asset.
(8) Company: The accounting record reflects the financial activities of a particular company or organization, not its owners or employees.
()) Complete information: Annual financial report and its description must contain all relevant data.
(10) Lowest price or market value: The price of inventories is determined by the price or market value, whichever is lower.
(11) Capital protection: Profits can be earned only if the company's capital returns to its original level or remains at a certain level.
(12) Counterparty: Transactions that affect income and expenses should be accounted for in the same accounting period.
(13) Meaning: Minor events can be ignored, but major events must be fully disclosed.
(14) Currency measurement: In the accounting process only those activities are recorded which (with some exceptions) can be expressed in monetary terms.
(15) Objective - Financial reporting should be based on verifiable evidence only, including audit trail.
(16) Recovery: Changes in the market value of an asset or liability can be recognized as income only when the asset is sold or the liability is changed.
(17) Units of measurement: Financial data should be recorded in common units of measurement (dollar, pound sterling, yen, etc.). They are also known as accounting conventions, accounting assumptions or accounting principles.
Meaning of Accounting concepts & Accounting concepts Definition