ACCOUNTING

CONCEPTS
Group - 2

Prepare By
DUAL ASPECT CONCEPT

 THE DUAL ASPET CONCEPCT INDICATES THAT EACH TRANSACTION MADE BY A

BUSINESS IMPACTS THE BUSINESS IN TO DIFFERENT ASPECTS WHICH ARE EQUAL
AND OPPOSITE IN NATURE.
 IS THE FOUNDATION OR PRINCIPILE OF ACCOUNTING .IT PROVIDES THE VERY
BASIS OF RECORDING BUSINESS TRANSACTIONS IN THE BOOKS OF
ACCOUNTS .THIS CONCEPT STATES THAT EVERY TRANSACTION HAS A DUAL OR
TWO FOLD EFFECT AND SHOULD THEREFORE BE RECORDED AT TWO PLACES.
 THE DUALITY PRINCIPLE IS COMMENLY EXPRESSED IN TERMS OF FUNDAMENTAL
ACCOUNTING EQUATION.
ACCOUNTING EQUATION

 ASSET= LIABILITIES + CAPITAL

 CAPITAL= ASSET – LIABILITIES
 LIABILITIES= CAPITAL – ASSET

EXAMPLE

SUPPPOSE THE FIRM PURCHASED GOODS WORTH RS 1000000 ON CASH.THIS WILL

INCREASE AN ASSET(STOCK OF GOODS) ON THE ONE HAND AND REDUCE ANOTHER
ASSET(CASH) ON THE OTHER.SIMILARILY, IF THE FIRM PURCHASE A MACHINE
WORTH RS3000000 ON CREDIT FROM RELIABLE INDUSTRIES.THIS WILL INCREASE AN
ASSET(MAHINERY) ON THE ONE HAND AND A LIABILITY(CREDITORS) ON THE OTHER
THIS TYPE OF DUAL EFFECT TAKE PLACE IN CASE OF ALL BUSNIESS TRANSACTIONS
AND IS ALSO KNOWN AS DUALITY PRINCIPLE.
GOING CONCERN CONCEPT

 The going concern concept is a fundamental principle of accounting. It assumes that

during and beyond the next fiscal period a company will complete its current plans, use
its existing assets and continue to meet its financial obligations.
 Should a company go out of business, its assets often lose the value they once held on
the balance sheet. This happens because certain company-specific assets (for example,
custom software) can be worth less in resale to others than the cost it took to get it. Or
if a company has to sell its assets in a hurry, it may not be able to wait for an optimal
selling price. If an accountant has reason to doubt the ability of a business to continue
as a going concern and meet its obligations and protect its assets, they are duty-bound
to include this in their audit report.
ASSUMES THAT A BUSINESS FIRM WOULD CONTINUE TO CARRY OUT ITS OPERATIONS
IN DEFINITLY THAT IS FOR A FAIRLY LONG PERIOD OF TIME AND WOULD NOT BE
LIQUIDATED IN THE FORESEEABLE FUTURE.

EXAMPLE

WHEN WE PURCHASE AN ASSET(MACHINERY) FOR A SUM OF RS 50000 WHAT WE ARE

BUYING REALLY IS THE SERVICES OF THE MAHINERY THAT WE SHALL BE GETTING
OVER ITS ESTIMATED LIFE SPAM SAY 5 YEARS.THUS WE NEED NOT CHARGED WHOLE
AMOUNT OF RS 50000 FROM THE REVENUE OF THE YEAR IN WIH THE ASSET IS
PURHASED.WE CAN HARGED RS 10000 FOR 5 YEARS P/L A/C.
COST CONEPT

 THE COST ONEPT REQUIRE THAT ALL ASSET ARE REORDED IN THE BOOK OF
ACOUNTS AT THEIR PURHASE PRICE WHIH INLUDES OST OF
ACQUISITION,TRANSPORTATION, INSTALLATION, AND MAKING THE ASSET READY
TO USE.
 The concept of cost is a key concept in Economics. It refers to the amount of payment
made to acquire any goods and services. In a simpler way, the concept of cost is a
financial valuation of resources, materials, risks, time and utilities consumed to
purchase goods and services.
 The concept of cost refers to the amount of payment made for acquiring goods and
services. According to this accounting principle of cost concept, items should be
recorded and valued at the price for which they were bought instead of the price at
which they can be sold now.
 THE CONEPT OF COST IS HISTORICAL IN NATURE AS IT IS SOMETHING , WHICH
HAS BEEN PAID ON THE DATE OF ACQUSITION AND DOES NOT CHANGE YEAR
AFTER YEAR.

 EXAMPLE

 IF A BUILDING AS BEEN PURCHASED BY A FIRM FOR RS 2.5 RORE,THE PURCHASE

PRIE WILL REMAIN THE SAME FOR ALL YEAR TO OME THOUGH ITS MARKET
VALUE MAY HANGE .