ACCOUNTING CONCEPTS AND CONVENTIONS.
In my last post, I discussed about the different types of accounting users. In my post today, I will be discussing about accounting concepts and conventions.
Accounting Concepts.
Accounting concepts are fundamental principles of accounting and they are issued by regulatory bodies such as the Nigerian Accounting Standard Board (NASB) and the International Accounting Standard Board(IASB). Concept are issued in SAS(statement if accounting standard) and they include the following:
Entity concept.
This concept stipulates that the business is different from the owner and that the business is concerned only about the amount invested by the owners. The business is a legal entity which can sue and be sued.Going concern.
This concept stipulates that the death of the owner of the business should not bring the business to a halt.Matching concept.
This concept stipulates that the income ascertak end for the period must match with the expenses incurred for that period.Periodicity concept.
This concept stipulates that the accounting period must be for twelve months or one year.Realization concept.
This concept stipulates that the revenue is recognised only when goods and services are lasted to customers in exchange to r a valuable consideration.Historical concept.
This concept stipulates that cost is the appropraite basis for initial accounting recognition of all asset acquired.Consistency concept.
This concept stipulates that the way and manner the account is prepared for a particular time must be prepared same wat for a long period of time.
Accounting Conventions.
Conventions refers to the basic truth, rules and regulations and standards that decisions are based upon. Listed below are some of the accounting conventions:
Objectivity.
This rule states that the account must not be biased, it should be prepared in the exact way it appears to be.Fairness.
This rule states that the accountant should not prepare the report to favour a certain group of persons.Materiality.
This rule states that the accountant should only take record of valuable items in preparing of financial statement.Prudence
This rules states that the accountant should be very careful I'm the recognition of profit while all expenses should be accounted for in preparation of the financial statement.
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