Principles of accounting and bookkeeping

In the modern world, no company can afford to remain secret because different subjects, such as creditors, employees, tax authorities, investors, public and public etc., are interested in the affairs of the business. Affairs of the business can be studied mainly by consulting accounts and the balance of specific activity. Financial statements and balance sheets are the final products accounting. Given the importance of these statements was necessary for accountants to develop some concepts, principles and conventions that may be considered as fundamental elements of accounting. These foundations agreement to provide greater reliability and creditability to financial statements prepared by accountants. The need of generally accepted accounting principles "is born for two reasons: first, to be logical and consistent in recording transactions and secondly, to satisfy, practices and procedures.

There is no agreement among economists regarding the basic concepts of accounting. There is no uniformity in generally accepted accounting principles (GAPP). The terms of axioms, assumptions, conventions, generalizations, concepts, methods, rules, doctrines, techniques, assumptions, standards and fees are used liberally and inconsistently in the same direction.

Principles

"A law or a rule adopted or professed as a guide for action, a field or a constant basis of a behavior or practice." This dictionary definition comes closest to describing what most accountants mean by 'principle' the word. You must be careful to make clear that, as applied to accounting practice, the principle of the world, does not involve a rule that there can be no deviation. An accounting is not a principle, in the sense that it admits no conflict with other principles.

Postulates

Middle to assume without proof, take for granted the consent or positive, a position taken as self-evident. Postulates are assumptions, but are not arbitrary assumptions deliberate, but the generally accepted hypothesis that reflect a judgment of 'facts' or trend or event, the assumptions that have been incurred in the past by the facts alleged by the legal institutions that make them applicable some extent.

Doctrines

Media principles of faith: what the Scriptures teach on any subject. They refer to an established principle propagated by a teacher who has followed the strict faith. But in accounting practice, this doctrine does not need to be respected, but the word indicates the general principles and policies to follow.

Axiom

Indicates a statement of truth that can not be questioned by anyone.

Standards

Refer to base referred to accounting practice, in different circumstances. In the Indian context, the Institute of Chartered Accountants of India (ICAI) has constituted an Accounting Standards Board April 21, 1977. The main function of ASB is to formulate accounting standards taking into account the applicable laws, customs, usages and business environment.

Hypotheses accounting

The International Accounting Standards Committee (lASC) and the Institute of Chartered Accountants of India (ICAI) treatment (IAS saw-I and AS-I) the following as critical accounting principles:

(1) Going Concern

In the ordinary course, accounting assumes that the company will continue to exist and carry on its activities for an indefinite period into the future. The entity should remain in operation long enough to carry out its objects and projects. The values ​​attached to the assets will be based on its current value. The assumption is that these assets are not for resale. Therefore, one can argue that a budget is prepared on the basis of the record of facts on historical costs can not demonstrate the true or real concern for a specific date. The fundamental principle is that of earning capacity and not the cost is the basis for the assessment of business continuity. The business is to continue indefinitely, and financial and accounting policies are followed to maintain the continuity of the business unit.

(2) Consistency

There should be uniformity in accounting processes, policies from one period to another. Material changes, if any, must also be indicated if there is an improvement in the technique. A change in the method from one period to materially affect the outcome of negotiations. Only when the accounting procedures are being met consistently from year to year results announced in the budget will be consistent and comparable.

(3) Provision

Accounting attempts to recognize non-cash events and circumstances in which they occur. For competence deals with future expected cash receipts and payments: is the process of accounting for assets, liabilities or income for amounts received or to be paid in the future. Common examples of expertise include sales and purchases of goods or services on credit, interest, rents (not yet paid), wages and salaries, taxes. So, we record all expenditure and income relating to the accounting period is actual cash has been pledged or received or not. If a fundamental accounting assumption (ie, business continuity, consistency and competence) is not followed (in policies), the fact should be disclosed. [AS-I para 27] ....