Accounting Assumptions or concepts

Accounting assumption or concept refer to necessary assumptions or conditions on which the accounting system is based. Assumptions provide a foundation for the accounting process.

1.Accounting entity concept                                                        Accounting entity concept assumed that business unit is business unit is distinct and completely separate from the owners.

2.Money measurement concept                                                  In this concept, transactions that can be measured in terms of money only are recorded in the books of accounts

3.Going concern concept                                                              Under this concept the business unit is assumed to have an indefinite life. It is States that the business organisation is treated as a continuing one for long time.

4.Accounting period concept                                                          The period of interval for which Account is kept for ascertaining the result of business during the period is called Accounting period                                                  

              

Basic Terms in Accounting Part 2

 Income                                                                                Income is the increase in the networth of the organisation either from business activity or other activities

Expenses                                                                                The amount spent in the process of earning revenue is called as expense. Rent, wages, salaries,water charges, electricity charges are the examples of expenses.

Loss                                                                               Loss is the gross decrease in the assets or gross increase in liabilities.

Profit                                                                               Profit is the excess of revenue over expenditure in an accounting year.

Purchase                                                                               The total amount of goods procured by a business concer for cash or on credit for the purpose of sale or use is known as purchases

Sale                                                                               The income earned from the sale of goods or services rendered. The amount received from the sale of fixed assets is not treated as sales

Debtors                                                                              Debtor is a person who owe money to the business

Creditor                                                                               Creditor are person who claim for money against the business for any goods supplied or services rendered by them on credit

Basic Terms in Accounting Part 1

Assets : Assets are things of value owned by                the business

1. Fixed assets : The assets which is intended to be used for long period or above one year

• Tangible assets: These are assets having         definite shape and physical existence      

• Intangible assets: Assets having no physical existence but are represented by rights in certain things

• Wasting assets: Assets which get exhausted to the extent of extraction

• Fictitious assets: These have no real value but are shown in the books of accounts only for technical reason

 2. Current Assets : Current Assets are those       assets which can be converted into cash       within a short period of time

 3. Capital : Money or money's worth                   invested by the owner into the business

 4. Drawings : The amount of cash or other         assets withdrawn by the owner of the           business

 5. Revenue : The amount earned by selling       its products or services

 6. Voucher : It is the documentary evidence
     of transaction

 7. Liabilities : Liabilities are the obligations

     or debt payable the company in future in       the form of money or goods

• Fixed Liabilities :  Liabilities which are payable after a long period or above one year.                     

• Current Liabilities :   Liabilities which are payable within a short period or less than one year