Fairfield Institute of Management and Technology

Concept of business entity, money measurement and duality principle

Subject- FINANCIAL ACCOUNTING

Subject code- 105

NAAC ACCREDITED

Submitted to: Submitted by: LAKSHAY MANCHANDA

MS. KANIKA Enrollment no: 125211420213
1st semester
 Table Of Content

Sl Topic Page No.

No.

1. Introduction

2. Accounting principle

3. Objective
4. Conclusion
5. Bibliography

6.

7.
 INTRODUCTION

What Are Accounting Principles?

Accounting principles are the rules and guidelines that companies must follow when reporting financial
data. The Financial Accounting Standards Board (FASB) issues a standardized set of accounting principles in
the U.S. referred to as generally accepted accounting principles (GAAP).

KEY TAKEAWAYS
Accounting standards are implemented to improve the quality of financial information reported by
companies.

In the United States, the Financial Accounting Standards Board (FASB) issues Generally Accepted
Accounting Principles.

GAAP is required for all publicly traded companies in the U.S.; it is also routinely implemented by non-
publicly traded companies as well.

Internationally, the International Accounting Standards Board (IASB) issues International Financial
Reporting Standards (IFRS).

The FASB and IASB sometimes work together to issue joint standards on hot-topic issues, but there is no
intention for the U.S. to switch to IFRS in the foreseeable future.

Understanding GAAP
GAAP is a combination of authoritative standards (set by policy boards) and the commonly
accepted ways of recording and reporting accounting information. GAAP aims to improve
the clarity, consistency, and comparability of the communication of financial information.

.
The ultimate goal of GAAP is to ensure a company's financial statements are complete,
consistent, and comparable. This makes it easier for investors to analyze and extract
useful information from the company's financial statements, including trend data over a
period of time. It also facilitates the comparison of financial information across different
companies.
Understanding Accounting Principles
The ultimate goal of any set of accounting principles is to ensure that a company's financial statements are
complete, consistent, and comparable. This makes it easier for investors to analyze and extract useful
information from the company's financial statements, including trend data over a period of time. It also
facilitates the comparison of financial information across different companies. Accounting principles also
help mitigate accounting fraud by increasing transparency and allowing red flags to be identified.

Accounting is both a science and an art. And just like all other streams of science, even in
accounting certain rules are followed. Also, accounting is based on certain assumptions as well. We
call these accounting concepts or accounting concepts and principles.

1] Business Entity Concept

This accounting concept separates the business from its owner. As far as accounting is concerned the
owner and the business are two separate entities. This will help the accountant identify the business
transactions from the personal ones. All forms of business organizations (proprietorship, partnership,
company, AOP, etc) must follow this assumption.

So for example, if the owner brings in additional capital into the business, we will treat this as
a liability on the balance sheet of the business.

2] Money Measurement Concept

This accounting concept states that only financial transactions will find a place in accounting. So
only those business activities that can be expressed in monetary terms will be recorded in
accounting. Any other transaction, no matter how significant, will not find a place in the financial
accounts.

So for example, if the company underwent a major management overhaul this would have no

effect on the accounting records. This concept is actually one of the major drawbacks of
accounting.
3]. Duality Concept
This concept is the basic principle of accounting, it is the heart and soul. It basically is one of the golden
rules of accounting – for every credit, there must be a corresponding debit. So every transaction we record
must have a two-fold effect, i.e. it will be recorded in two places. This is the core concept of the double-
entry system of accounting.

So let us see an example of this in action. Say the business buys an asset worth Rs 10,000/-. So now the
Fixed Assets of the company will increase bt 10,000/-. But at the same time, the bank or cash balance
will reduce by 10,000/-. And so the transaction will have a dual effect in accounting. And also the
Balance Sheet will stay balanced.

The ultimate goal of any set of accounting principles is to ensure that a company's
financial statements are complete, consistent, and comparable. This makes it
easier for investors to analyze and extract useful information from the company's
financial statements, including trend data over a period of time.
 OBJECTIVE

Financial accounting principles shape the recording of nearly every business transaction in the
business world. The creation of these principles is no small task and can sometimes seem nearly
arbitrary. However, understanding the objectives of generally accepted accounting principles, or
GAAP, provides insight into how these principles are created and makes it easier to remember
accounting rules.

The ultimate goal of any set of accounting principles is to ensure that a company's financial
statements are complete, consistent, and comparable. This makes it easier for investors to analyze
and extract useful information from the company's financial statements, including trend data over a
period of time.
 CONNCLUSION

An Accountant should have clear concept on accounting concept that may help to recognize the income
and expenses. A clear understanding on accounting concepts may help to an accountant producing a
reliable financial report.

Accounting principles have been around for ages with advancements occurring regularly . Especially
over the last twenty years, accounting information systems have revolutionized the profession .
Data is input, stored, and manipulated in ways the ancient Egyptians could not imagine . These
advancements tend to go unnoticed by the general population . Those that use the technology
everyday can become too reliant and not critically apply fundamentals when analyzing
information . Regardless of the application, all systems are important and useful when used
correctly . Honesty and integrity are a couple of the crucial attributes in accounting that allow for
proper application of accounting principles and systems
 BIBLIOGRAPHY

1.www.wekipedia.com

2. www.examidea.com