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Accounting Concepts

Accounting Concepts

These are the assumptions which are fundamental to the

accounting practice and are based on logical
 Separate Entity Concept
 Money Measurement Concept
 Accounting Period Concept
 Going Concern Concept
 Cost Concept
 Conservatism or Prudence Concept
 Materiality or Relevance Concept
 Consistency Concept
 Matching Concept
 Accrual Basis of Accounting
 Double Entry Concept
 Timeliness Concept
 Revenue Recognition
Illustration 1

Ram Manohar & Sons is a proprietorship firm, owned by

Mr Ram Manohar. During the year 2010 , the firm bought

goods worth Rs 10 lakh .Goods costing Rs 1 lakh were

consumed by Mr Ram Manohar for personal use. The

remaining goods were sold for Rs 9,60,000.How should

this be treated in the books of accounts of the firm?

Illustration 2

After the death of the promoter of E- Sports limited ,

there is a fierce dispute between the two sons for

succession. How will this be reflected in the books of

accounts of the company?

Illustration 3

Hindustan Boilers Limited , an Indian subsidiary of an US

company, prepares its accounts using financial year as

the accounting period. The US parent company

prepares its accounts on the calendar year basis. What

kind of problem the US company would face to present

consolidated results?
Illustration 4

Industrial Lab Limited bought a piece of land for Rs 5 cr.

in the year 2000.The company had used the land to set

up an industrial unit. The current market price of the land

is Rs 20 cr. At what value this asset should be shown in

the financial statements of the company?

Illustration 5

Reliable limited sells goods on credit basis .On 31 March

2011 , it has a total outstanding of Rs 120 lakh from its

customers. The past experience shows that about 5% of

the customers invariably default .How do we account

for this?
Illustration 6

Red Swan Auto Limited is proposing to change its

accounting policy for the valuation of inventories ,as the

management feels that it would lead to better

estimation of the cost of inventories. Can they do so?

Illustration 7

ABC Diagnostic Limited has the practice of paying the

monthly salary on the 7th of the next month. Accordingly

, salary for the month of March 2011 was paid on 7th

April 2011. If the company follows cash basis of

accounting ,when would the expenses be recognized?

What if the company follows accrual basis of

Thank You