accounting concept
Topics: Balance sheet, Bookkeeping, Periodization, Generally Accepted Accounting Principles, Ontology, Economics / Pages: 7 (1211 words) / Published: Sep 25th, 2014

Author: Mr Nasheeb Rassan www.iccf6.com ------------------------------------------------------------------------------------------------------------------------------------------

Accounting Concept and Conventions
In drawing up accounting statements, whether they are external "financial accounts" or internally-focused "management accounts", a clear objective has to be that the accounts fairly reflect the true "substance" of the business and the results of its operation.
The theory of accounting has, therefore, developed the concept of a "true and fair view". The true and fair view is applied in ensuring and assessing whether accounts do indeed portray accurately the business' activities.
To support the application of the "true and fair view", accounting has adopted certain concepts and conventions which help to ensure that accounting information is presented accurately and consistently. Accounting Period Concept
Also known as Time Period where business operation can be divided into specific period of time such as a month, a quarter or a year (accounting period)
Final accounts are prepared at the end of the accounting period ie one year. Internal accounts can be prepared monthly, quarterly or half yearly.

Accounting Conventions
The most commonly encountered convention is the "historical cost convention". This requires transactions to be recorded at the price ruling at the time, and for assets to be valued at their original cost. Under the "historical cost convention", therefore, no account is taken of changing prices in the economy. Business should report its activities or economic events at their actual cost. For example, fixed assets are recorded at their cost in accounts except for land which can be revalued due to application.

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Author: Mr Nasheeb Rassan www.iccf6.com ------------------------------------------------------------------------------------------------------------------------------------------

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