Accountancy

What are Accounting Concepts?

Accounting concepts are a set of general conventions that can be used as guidelines when dealing with accounting situations. These concepts have also been integrated into the various accounting standards, so that a user will not implement a standard and then find that it is in conflict with one of the accounting concepts. The key accounting concepts are noted below.

Completeness

Accounting information should be complete in all respects.

Availability

Accounting information should be made available to users on a timely basis.

Understandability

Accounting information should be presented in a manner that is easily understandable to the user.

Relevance

Accounting information should be relevant to the needs of users.

Reliability

Accounting information should be reliable.

Unbiased

Accounting information should contain no biases.

Faithful Representation

Accounting information should faithfully represent the related business transactions.

Consistency

Accounting policies should be consistently applied over time, so that financial statements are consistent and comparable.

Measurable

A business transaction should only be recorded when it can be measured in a currency.

Matches Revenue

Expenses should be recognized in the same period in which related revenues are recognized.

Going Concern

Financial statements are prepared under the assumption that a business will be a going concern.

Materiality

Information should be reported if its absence would otherwise cause a user to make a different decision.

Conservative

Revenue estimates should not be overstated, nor should expense estimates be understated.

Recognition

Revenue should be recognized only when it has been earned.