Accounting – Accounting Concepts
In our last post on accounting, we talked about the seven basic concepts of accounting.
Let us talk about these in more detail.
The first accounting concept was Going Concern – The business entity is in business as usual mode.
Although the authors of accounting books do not classify this as the top level concept, but I personally feel this is the most important concept, as it indicates normal accounting.
This concept states that the business is currently ongoing, and will continue to be in this state for a reasonably long period of time. The transactions will be recorded in the books of accounting, keeping in mind the period of benefit derived from them. In case if the benefits are short term, primarily within the tenure of an accounting period, they will reflect in the current profit and loss, those having a reasonable length, say five times the tenure, will be called deferred revenue items, booking one-fifth to the current profit and loss, and the balance will reflect in the balance sheet, and for long term, like fixed assets, will become a part of the balance sheet only.
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