The rules of action or conduct which are derived from experience and practice and when they prove to be useful that are called as '' General Accepted accounting principle (GAAP)". Those rule have been commonly accepted by the professional accounting world as general guidelines for preparing accounting .
A brief explanation of some accounting concept and convention is given in the following paragraphs
(i) Business entity concept (Assumption) :- For accounting purpose , a business is treated as a separate entity .
It is distinct from its owner and all other economic activities . Under this concept , it is assumed that the business enterprise exists its own rights .The affairs of the business should not be mixed up with the private affairs of owners or other persons associated with it. A true picture of the financial condition of a business enterprise can be represented with the help of this concept .
(ii) money measurement concept (Assumption) : All business transaction are expressed in terms . This assumption is supported because the monetary unit is relevant , simple and understandable . those transactions which cannot be processed in terms of money cannot be recorded . The reforge they should be ignored.
(iii) going concern concept (Assumption ): According to this concept , it is assumed that the business will continue in future for at least a reasonably long period of time . It is assumed that the business gad an indefinite life unless it is likely to be sold or wound up in the near future . That is why ,it is also called the continuity assumption .
A brief explanation of some accounting concept and convention is given in the following paragraphs
(i) Business entity concept (Assumption) :- For accounting purpose , a business is treated as a separate entity .
It is distinct from its owner and all other economic activities . Under this concept , it is assumed that the business enterprise exists its own rights .The affairs of the business should not be mixed up with the private affairs of owners or other persons associated with it. A true picture of the financial condition of a business enterprise can be represented with the help of this concept .
(ii) money measurement concept (Assumption) : All business transaction are expressed in terms . This assumption is supported because the monetary unit is relevant , simple and understandable . those transactions which cannot be processed in terms of money cannot be recorded . The reforge they should be ignored.
(iii) going concern concept (Assumption ): According to this concept , it is assumed that the business will continue in future for at least a reasonably long period of time . It is assumed that the business gad an indefinite life unless it is likely to be sold or wound up in the near future . That is why ,it is also called the continuity assumption .
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