Accounting Concept

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Accounting Concept by Mind Map: Accounting Concept

1. Accruals Concept

1.1. Expenses and revenues are recorded in the period they occur, whether or not cash is involved.

1.2. Needed to ensure that all revenues and expenses are recognized within the correct reporting period.

2. Accounting Period Concept

2.1. The time span in which certain financial events took place.

2.2. The accounting period is generally a quarter or a year.

2.3. Every companies has a different accounting period.

3. Dual Aspect Concept

3.1. Every business transaction requires recordation in two different accounts.

3.2. Basis of double entry accounting.

3.3. Derived from accounting equation ' Assets = Liabilities + Equity '.

3.4. Required for financial auditing.

4. Money Measurement Concept

4.1. Recorded event or transaction is measured in terms of money.

4.2. Transaction or event which cannot be expressed in terms of money is not recorded.

4.3. Inflation / changing purchasing power of money that occurred is doesn't considered to record.

5. Periodic Matching of Lost and Revenue Concept

5.1. One of the basic underlying guidelines in accounting.

5.2. Directs a company to report an expense on its income statement in the same period.

5.3. Without matching principle concept, a company maybe report expense and liabilities