ACCOUNTING CONCEPTS, PRINCIPLES AND CONVENTIONS

INTRODUCTION:- Suppose we give to prepare our accounts from five different Accountants. After some time all accountants come with their accounts by showing different profit, since all of them followed different accounting policies. In that case it will not serve the purpose of accounting. So it is necessary that there should be some principle, so that all accounts prepared by any number of accountant will show same amount of profit. So to avoid confusion and to ensure uniformity, GAAP (Generally Accepted Accounting Principles ) are framed. GAAP describes rule for preparation of financial statement called concepts, conventions, principles etc. These principles are ground rules, which define parameters & constraints within which accounting reports are prepared.

ACCOUNTING CONCEPTS:- These are basic assumptions and conditions on the basis of which financial statements are prepared. Certain concepts are perceived, assumed and accepted in accounting to provide unifying structure and internal logic to accounting process. The concept means idea or notion, which has universal application. Financial statements are interpreted in the light of the concept, which govern accounting methods.concepts are those basic assumptions and conditions, which form the basis upon which the accountancy has been laid. Accounting concepts are only results of broad consensus. These accounting concepts lay down the foundation on the basis of which the accounting principles are formulated.

ACCOUNTING PRINCIPLES:-- These are body of doctrines commonly associated with the theory and procedures of accounting serving as an explanation of current practices . They act as guide for selection of accounting procedures or conventions where alternative exists. Accounting principle must satisfy following conditions:-

1.They should be based on Real Assumptions.

2.They must be Simple, Understandable and Explanatory.

3.They must be followed consistently.

4.They should Reflect Future Predictions.

5.They should be Informational for users.

ACCOUNTING CONVENTIONS:-- These emerge out of Accounting Practices, commonly known as accounting principles adopted by various organizations over a period of time. These conventions are derived by usages and practices. It improves Quality of Accounting Information.