Chapter#4 Accounting Concepts & Conventions
Chapter#4 Accounting Concepts & Conventions
Consistency According to this principle, the accountant should use the same
methods and functions for different periods of time. For example,
the same rate of percentage should be applied for all
depreciation. This principle is also known as the principle of
regularity.
Substance Over Substance over form is an accounting concept which means that
Form the economic substance of transactions and events must be
recorded in the financial statements rather than just their legal
form.
Historical Cost From an accountant's point of view, the term "cost" refers to the
Convention amount spent (cash or the cash equivalent) when an item was
originally obtained, whether that purchase happened last year or
thirty years ago.
Fair Value Fair value is defined as ‘the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date’.
Value to the Business value expands concept of value of the firm beyond
Business economic value (also known as economic profit, economic value
added, and shareholder value) to include other forms of value
such as employee value, customer value, supplier value, channel
partner value, managerial value, and societal value. Many of these
forms of value are not directly measured in monetary terms.