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By:Bhawna Dhamija

MBA 1 A

Roll No. : 25

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BASIS ACCOUNTING CONCEPTS ACCOUNTING CONVENTIONS

Nature Accounting concepts are

generally agreed principle

followed by accountant.

Accounting conventions have

no general applicability.

These are flexible, optional

and provides severalalternative practice.

Established By Law Guidelines based upon

customs or usage

Biasness No space for personal biasness inthe adoption . It has uniform

adoption.

Biasness in adoption. It hasno uniform adoption.

Use These are primarily used in

recording, classifying, analyzing

and communicating financial

information of a business.

These are primarily used for

preparing financial

statements

Mandatory by

regulating agency

Accounting concepts are made

mandatory in a specific

accounting standard enforced

by a regulating agency.

Conventions are not

mandatory to be enforced by

any regulating agency.

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Examples of accounting concept:

Separate Entity Concept , Money measurement

concept

Examples of accounting convention:

Convention of full disclosure, conservatism ,consistency , materiality..

To summarize , accounting concepts areassumptions or fundamental proposition onwhich accounting depends and conventions aretraditions or customs that guide in preparingaccounting statements.

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What to match?Expense is to be matched with revenue.

When to match?

Either at the end of the life of business or at theend of each year.

How to measure revenue and expense?

Measurement of Revenue

- Revenue is measured according to accrualconcept.

- Revenue is considered to be earned on its being

realised.

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Measurement of Expense

- Period of recognition (expense being directly

or indirectly associated with revenue of that

period)

- Determination of amount of expense

(traditional approach and replacement

approach )

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