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    Accounting Postulates, Concepts and Principles

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    Kkaran Sheth
    1. The document outlines key accounting postulates, concepts, and principles. It discusses four main postulates: the entity postulate, going concern, money measurement, and accounting period. 2. It also defines concepts as self-evident truths that guide the application of accounting and explains principles as decision rules derived from concepts that specify how to apply concepts. 3. The key postulates assume businesses are distinct from owners, will continue operating, use monetary units of exchange to measure activities, and report on periodic time intervals.

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    Accounting Postulates, Concepts and Principles

    Uploaded by

    Kkaran Sheth
    445 views4 pages
    1. The document outlines key accounting postulates, concepts, and principles. It discusses four main postulates: the entity postulate, going concern, money measurement, and accounting period. 2. It also defines concepts as self-evident truths that guide the application of accounting and explains principles as decision rules derived from concepts that specify how to apply concepts. 3. The key postulates assume businesses are distinct from owners, will continue operating, use monetary units of exchange to measure activities, and report on periodic time intervals.

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    Postulates and Principles

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    1. The document outlines key accounting postulates, concepts, and principles. It discusses four main postulates: the entity postulate, going concern, money measurement, and accounting period. 2. It also defines concepts as self-evident truths that guide the application of accounting and explains principles as decision rules derived from concepts that specify how to apply concepts. 3. The key postulates assume businesses are distinct from owners, will continue operating, use monetary units of exchange to measure activities, and report on periodic time intervals.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    445 views4 pages

    Accounting Postulates, Concepts and Principles

    Uploaded by

    Kkaran Sheth
    1. The document outlines key accounting postulates, concepts, and principles. It discusses four main postulates: the entity postulate, going concern, money measurement, and accounting period. 2. It also defines concepts as self-evident truths that guide the application of accounting and explains principles as decision rules derived from concepts that specify how to apply concepts. 3. The key postulates assume businesses are distinct from owners, will continue operating, use monetary units of exchange to measure activities, and report on periodic time intervals.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 4

    ACCOUNTING POSTULATES ,CONCEPTS AND

    PRINCIPLES
    • POSTULATES:
    • Basic assumptions which are generally accepted as self-evident truths in accounting.
    1. ENTITY POSTULATE
    • It assumes that the financial statement and other accounting information are for
    the specific business enterprise which is distinct from its owner.
    • Focus on the economic activities of the individual business enterprise.
    • Transactions of the enterprise to be reported rather the transactions of the
    enterprise’s owner.
    • Applies to the sole proprietorship, partnership, companies and small and large
    enterprises.
    • Small firm difficult to differentiate the activities of owner and the enterprise.
    • In case of company distinction is quite easy to make.
    • Owners, creditors ,banks, and others give funds to management and management
    is required to use the funds effectively.
    • accounting reports are one principle means to show how well this responsibility is
    discharged.
    2. GOING CONCERN
    • An accounting entity is viewed as continuing in operation in the absence of evidence
    to the contrary
    • Past experience indicates that continuation of operation is highly probable.
    • It justifies the valuation of asset on a non-liquidation basis and calls for the use of
    historical cost.
    • Business is viewed as mechanism for creating value, and its success is measured by the
    difference between the value its outputs and the cost of resources used in creating those
    output.

    3. MONEY MEASUREMENT POSTULATE:


    • A unit of exchange is necessary to account for the transaction in uniform manner.
    • Common denominator chosen in accounting is the money unit.
    • Money measurement concept holds that accounting is measurement and communication
    process of the activities of the firm that measurable in monetary terms.
    • Financial statement should indicate the money used.
    • Limitations:
    • Reflects in terms of monetary unit and not in any other non monetary information
    required.
    • Assumes that purchasing power of money is stable over time or that the changes in prices
    is not significant.
    4. ACCOUNTING PERIOD POSTULATE:

    • Economic activities of the enterprise for specific period


    • Time period usually for 12 months
    • Some times quarterly, half yearly statement are also issued.
    • Managerial used ,statement covering shorter period such as a month or a week
    etc.
    • Problems are faced like allocation of cost of the asset to specific period, treatment
    of R&D,cost.
    CONCEPTS
    • CONCEPTS are self-evident statement or truths.
    • Basics that people accept as valid without any questioning
    • Conceptual guideline for application of accounting process.
    • They explain the “why” of accounting
    • Provide guidance for further new situations
    • Reduces the need for memorizing the accounting procedure.

    • PRINCIPLES:
    • General decision or rules derived from accounting concept.
    • Accounting principles are man made. Unlike physics, chemistry
    • For how to apply the concept.
    • Evolutionary process is going on constantly

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