Scribd
Upload
50 views19 pages

Accounting Principles, Standards & System

This document discusses accounting principles, standards, and systems. It explains that generally accepted accounting principles (GAAP) provide concepts and conventions to prepare financial statements that satisfy criteria like understandability, relevance, consistency, and reliability. Key concepts discussed include the business entity, monetary measurement, going concern, and accrual concepts. Accounting conventions ensure disclosure, consistency, and conservatism. Accounting standards are set by regulatory bodies and the standards board to provide a true and fair view in financial statements.

Uploaded by

Vivek Desai
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
50 views19 pages

Accounting Principles, Standards & System

This document discusses accounting principles, standards, and systems. It explains that generally accepted accounting principles (GAAP) provide concepts and conventions to prepare financial statements that satisfy criteria like understandability, relevance, consistency, and reliability. Key concepts discussed include the business entity, monetary measurement, going concern, and accrual concepts. Accounting conventions ensure disclosure, consistency, and conservatism. Accounting standards are set by regulatory bodies and the standards board to provide a true and fair view in financial statements.

Uploaded by

Vivek Desai
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 19

ACCOUNTING PRINCIPLES,

STANDARDS & SYSTEMS


Generally Accepted Accounting
Principles (GAAP)
What is GAAP?
• Concepts & Conventions to be followed for
preparation of financial statements.
• Formulated & recognized by regulatories
bodies throughout the world.
Why the GAAP?
Accounting information should satisfy the
following criteria:
• Understandability
• Relevance
• Consistency
• Comparability
• Reliability
• Objectivity
• GAAP = Accounting Concepts
+
Accounting Conventions
• Adhere to the concept of ‘True & Fair View’
to ensure accuracy & consistency of financial
statements.
Accounting Concepts
• Business Entity concept
Business has a separate entity from its
owners.
Funds of Owners & Creditors are at the
disposal of Managers.
Accounting Concepts
• Monetary measurement concept-
Information is presented in monetary terms.
• Going Concern concept –
Accountants assume, unless there is evidence
to the contrary, that a company is not closing
down. This has important implications for the
valuation of assets and liabilities.
Accounting Concepts
• Cost Concept –
An asset is recorded in books at cost of
acquisition & not at current market value.
• Dual Aspect concept –
Based on double entry system
• Realization concept –
Revenue is considered as being earned
on the date at which it is realised.
Accounting Concepts
• Concept of Objectivity –
Transactions are supported by
documents.
Ensures credibility.
• Concept of Conservatism –
Income/profits considered only when
actually realised, but account must be
taken of all expenses.
Accounting Concepts
• Accrual/Matching Concept –
Expenses recognised in an accounting
period should be matched with revenues
recognised in that period.
• Consistency concept –
Methods of valuation of stock,
depreciation , etc. should be followed
consistantly over years.
Accounting Conventions
• Convention of Disclosure –
Financial statements must fully disclose
the true & fair view of business activities
during a particular period.
All relevant information should be
disclosed.
Accounting Conventions
• Convention of Consistency –
Accounting practises & methods should
remain consistent over years for prorer
comparison & decision –making.
Accounting Conventions
• Convention of Conservatism –
It insists the need for not expecting any
profit till the same is realized, as future is
uncertain. But provide for all possible
losses.
Accounting Conventions
• Convention of Materiality –
This implies that insignificant
information should not be reported in
financial statements.
Accounting Standards
• In India accounting standards are
formulated by Accounting Standard Board
of ICAI.
• Institutions that Influence the Indian GAAP
are ICAI, SEBI, CBDT, RBI, Dept. of
Company Affairs, Comptroller & Auditor
General of India.
Accounting Systems
• Cash system
Transaction recorded only when money
is actually received or paid.
Income = revenue received
less
expenses paid
Accounting Systems
• Accrual/ Mercantile system –
records income/expenses relating to
current year.
System of Book-Keeping
• Single Entry system
• Double Entry system
Types of Accounts
• Real accounts-
Tangible & Intangible assets
• Personal accounts
Natural or artificial person created by law.
• Nominal accounts
Income/expenses or Loss/gain.
Rules for Accounting
• Real a/c –
Dr. what comes in, Cr. What goes out.
• Personal a/c –
Dr. the receiver, Cr. The giver.
• Nominal a/c –
Dr. exp/loss, Cr. Income/gains.

You might also like