 Generally Accepted Accounting principles:

 Principles of accounting are the general law or

rule adopted or proposed as a guide to action, a
settled ground or basis of conduct or practice
 According to American Institute of Certified
Public Accountants(AICPA): GAAP have
substantial authoritative support and general
acceptability.
 GAAP must be relevant (meaningful), objective
(reliable) and feasible(implemented without
much cost and complexity)
Accounting Concepts
Accounting concepts are basic assumptions or
fundamental propositions with in which
accounting operates.
They are generally accepted accounting rules
based on which transactions are recorded and
financial statements are prepared.
It is important to follow the accounting concept
because it enables the user of financial
statements to understand them better and in
the same manner
Accounting Conventions 
Accounting conventions are the outcome of
accounting practices or principles being
followed by the enterprise over a period of
time conventions may undergo a change with
time to bring about improvement in the quality
of accounting information.
 Going Concern Assumption
 Consistency Assumption
 Accrual Assumption
 It is assumed that business shall continue for a
foreseeable period and there is no intention to
close the business or scale down its operations
significantly.
 This implies that it will not be dissolved in the
immediate future unless there is clear evidence
of closure
 Once selected and adopted, should be applied
consistently year after year.
 The concept helps in better understanding of
accounting information and makes it
comparable with that of previous years.
 A transaction is recorded in the book of
accounts at the time when it is entered
information and not when the settlement take
place.
 Thus, revenue is recognized when it is realized,
i.e., when sale is complete or services are
rendered; it is immaterial whether cash is
received or not.
 Accounting Entity/Business Entity
 Money Measurement.
 Accounting Period Principle.
 Full Disclosure Principle.
 Materiality Principle.
 Prudence / Conservative Principle.
 Cost Concept /Historical Cost Principle.
 Matching Concept / Matching Principle
 Revenue Recognition Concept.
 Verifiable Objective concept.
 Dual Aspect / Duality Principle.
 According to this principle business is
considered to be separate and distinct from its
owners.
 Business transactions ,therefore, are recorded
in the book of accounts from the business point
of view and not from that of the owners .
 Owners being regarded as separate and
distinct from business they are considered
creditors of the business to the extent of their
capital.
 The money measurement principle transaction and
events that can be measured in money term are
recorded in the book of account of the enterprise.
 The principle suffers from two major limitation:
a) Transaction and events that cannot be measured in
money term are not recorded in the book of
account.
b). The value of money is considered to have static
value as the transaction are recorded at the value
as the transaction date.
 The life of an enterprise is broken in to smaller
period so that its performance is measured at
regular intervals.
 According to the companies act and banking
regulation Act, accounting period should
consist of twelve months. The period of twelve
month is regarded as ideal and convenient
period for accounting. accounting period
facilitates the business in assessing its worth
after a year
 “There should be complete and understandable
reporting on the financial statement of all
significant information relating to the economic
affairs of the entity”
 A part from legal requirements good
accounting practice require all material and
significant information should be disclosed
whether information should be disclosed or not
always depends on materiality of the
information.
 The materiality Principle refers to the relative
importance of an item or an event according to
the American accounting association “an item
should be regarded as material if there is a
reason to believe that knowledge of it would
influence the decision of an informed investor".
 Thus, whether an item is material or not will
depend on its nature and/or amount.
 An assets is recorded in the books of accounts
at the price paid to acquire it and the cost is the
basis for all subsequent accounting of asset.
 Asset is recorded at cost at the time of its
purchase but is systematically reduced in value
by charging depreciation.
 The market value of an asset may change with
the passage of time but for accounting purpose
it continues to be shown in the books of
accounts at it book value.
 It takes in to consideration all prospective
losses but not the prospective profits.
 The application of this concept ensure that the
financial statements present a realistic picture
of the state of affairs of the enterprise and do
not paint a better picture than what it actually
is the concept of conservatism needs to be
applied with more caution and care so that the
results reported are not distorted.
 The verifiable objective concept holds that
accounting should be free from personal bias.
 Measurement that are based on verifiable
evidence are regarded an objective.
 It means all accounting transaction should be
evidenced and supported by business
document.
 Revenue is considered to have been realised
when a transaction has been entered in to an
obligation to receive the amount has been
established.
 It is to be noted that recognising revenue and
receipt of an amount are two separate aspect .
 E.g.: An enterprise sell goods in Feb. 2019 &
receives the amount in April 2019. revenue of
this sales should be recognised in Feb. 2019
when the are sold
 It is important to match “revenues” of period
with the „expenses‟ of that period to determine
correct profit(or loss)for the accounting period.
  Every business transaction has double effect .
There are two sides of every transaction.
 This concept states that every transaction has a
dual or two- fold effect and should therefore be
recorded at two places.
 In other words, at least two accounts will be
involved in recording a transaction
 Accounting standards are written policy
documents issued by expert accounting body
or by government or other regulatory body
covering the aspects of- recognition, treatment,
measurement, presentation and disclosure of
accounting transactions and events in financial
statements.
 In INDIA, Accounting Standards are issued by
ICAI – Accounting Standards Board(ASB)
which was formed on 21st April,1977 as ICAI
being premier accounting body in the country,
took upon itself the leadership role by
constituting the ASB
 In India, 32 Accounting Standards are issued as
IAS under NACAS now known as NFRA.
 31Accounting standards in force or useful.
 As per International system, there are 41
Accounting Standards called as IFRS

 Adopted by 8 countries in the world

 70 to 80 countries planning to adhere IFRS

   Standardize the diverse Accounting Policies,
valuation norms and disclosure requirements.
 Eliminate the non-comparability of financial
statements and thereby improving the
reliability of financial statements.
 Eradicate baffling variation in treatment of
accounting aspects
 Facilitate inter-firm and intra-firm comparison