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2. Generally Accepted Accounting Principles
The Backbone of Accounting Information system,
Accounting Assumptions.
Accounting Concepts/Conventions.
Accounting Standards.
( Accounting Principles are the doctrines behind the application of accounting concepts/practices)

3. Fundamental Accounting Assumptions
Consistency
Accrual
Going concern

4. Consistency
Meaning : Accounting policy chosen should be consistently applied
Example : ABC Ltd. uses WDV method of Depreciation, year after year.
Objective: Comparability, Understandability

5. Accrual A Basis of Accounting.
Transactions are recorded as per its accrual/not on realization.
Expenses are recognized on its incurrence, not when paid
Incomes are recognized when earned, not received.

6. Basis of Accounting Accrual basis Cash Basis
Recording in the period of Recording in the period of
transaction accrued (Cash/Credit) receipt/payment of Cash
Distinction of Capital/Revenue No such distinction
transactions
Capital Transactions (Balance Sheet)
Revenue transactions (P & L A/c)
Eg. P & L A/c, Eg. Cash, Bank, Receipts Income & Expenditure A/c & Payments A/c

7. Going Concern
The business will go on forever, It will never end either intentionally or unintentionally. Due to this concept, the Assets/Liabilities have been divided into Fixed/Current.

8. Fundamental Accounting Assumptions
As per Accounting Standard 1
“ Disclosure of Accounting Policies”
Accounting Assumptions are not to disclosed (if followed)

9. Accounting Concepts Business Entity Money Measurement Dual Aspect
Historical Cost Conservatism
Matching Periodicity
Materiality Full Disclosure
Revenue Recognition

10. Business Entity Concept
Owner & the business Entity are separate persons
Personal assets/liabilities not included in business accounting
Personal expenses from business- “Drawings”
Capital by owner- “Liability” for business

11. Historical Cost Conept
Asset/Liability – recorded at ORIGINAL COST
Market Value/Time value of money- not considered.
Original Cost= Purchase Cost + Capital Expenditure

12. Money measurement Concept
Transactions/Events measurable in Money are only considered Only Quantitative transactions (No Qualitative) Items, not in money terms “ not a transaction at all”- should not be recorded

13. Interesting, right?
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