Different accounting concepts at the recording stage are generally accepted accounting principles which form the basis of preparing the Various form of financial statements. Concepts related to accounts, provide a foundational framework for making statements at the recording stage. When implementing these concepts, very effectively, it encourages business units to maintain statements in a meaningful way. It is very important for accountants to clearly understand the basic accounting concepts. Some of these concepts are:-
Business entity concept:-
Business entity concept states that business is a separate entity and it is different from its owner. The accounting system gives information only about the business and not about its owner. The accountant only records these types of transactions which are directly related to the business. The owners personal affairs are not recorded in business accounts. Another aspect of business entity concept is that the owner a business is to be treated as creditor. The amount invested by a owner is treated as liability for the business. This concept is applicable to all forms of business organisations. This concept enables accountant to ascertain profit and loss of a business more accurately.
cost concept:-
In simple term, cost concept states that any assets that the entity records will be recorded as historical cost which means acquisition cost of assets. This concept enables accountant to record asset and liability at original acquisition cost, but one key aspect in this concept is that these assets change their market a value over time. These assets are recorded without depreciation and no rise or fall in the market price is taken into account and it is applied only to fixed assets.
Money measurement concept:-
Money measurement concept states that only those transactions are recorded which are measured in terms of money. That means only financial transactions are recorded in the books of accounts.
Historical record concept :-
According to historical cost concept only those types of transactions ane recorded which have actually taken place, that means future transactions are not recorded. Future transactions can not measured and identify accurately. So, it is necessary to record only those transactions, which have taken place. There is a provision for on Some unexpected losses in future and it is regarded as doubtful debts but this is not come under historical cost concept.
Dual aspect concept:-
Duel aspect concept is one of the key concept of book keeping. It states that every transaction has two aspects, these are debit and credit. The accountant has to record every transaction and give every transaction to both debit and credit elements. This concept involves double entry book keeping system. It also states that total assets of an business unit or any other organisation is always equal to the total of its liabilities.
Objective evidence concept:-
This concept states that transactions should be supported by objective evidence and verifiable data. This concept ensures that financial statements are reliable and credible. This concept should kept in mind while preparing accounting statements. All accounting transactions should be supported by cash memos, receipts, vouchers etc.
Apart from all these concepts, there are many other concepts, which should kept in mind while preparing statements at the recording stage. These principles and rules has helped developed the understanding of recording financial transactions.
Accounting year concept:-
According to this concept, every business organisation has a specific time period to complete its accounting process, such as monthly, quarterly, annually ete. Accountants must aware of this aspect while preparing accounting statements.
Realisation concept:-
Basic fact of accounting process is that, profit is recognised only when it is earned. Future profit or profit earned advance should not regarded profit, while recording or making statements.
Going Concern Principle:-
according to this principle, all business transaction should be carried out on a continuous basis. The fact is also important for accountant while making statements.
Now, I can conclude that, accounting concept are very important not only for running business, but also for maintaining statements.
Principles of organisations facilitate smooth functioning of business :-
The principles of organisation play an important role in facilitating the smooth functioning of an organisation. Principles of an organisation are guidelines for planning an efficient organisation structure. Organisations are complex systems of people, resources and processes designed to achieve a common goal. To ensure that, this goal is achieved, organisations have basic principles that provide direction and guidance. some of the much needed principles of organisations are discussed below:-
Proper directions :-
For smooth functioning of an organisation, there should be clear direction about goals, roles and responsibility. Clear and proper direction facilitates smooth progression towards the achievements of the overall organisational goal.
Continuity :-
An organisation must remain stable and consistent oven time. Organisation should not make drastic changes to its structure, mission and goal. This concept should be kept in mind while functioning an organisation.
Utilisation of resources :-
There should be optimisation of resource allocation by ensuring that resources including human, financial and material are allocated efficiently to fullfill organisational goal and also an organisation can make the most effective use of available resources.
Co-ordinations :-
Co-ordination across different functions, departments and different levels of organisation is essential for smooth functioning of an organisation. Co ordination fulfills common objectives and achieve greater efficiency and effectiveness.
Flexibility :-
Flexibility allows organisations to respond to changing internal and external environments. Organisations policy must not be rigid and it should adapt to changing modern technology and the environment.
Authority and responsibility :-
Proper functioning of an organisation depends on proper managing of its authority and responsibility. Authority should always be coupled with responsibility. There is a clear chain of command. Everyone should understand their role and execute their role accordingly. It is also a key aspect of smooth functioning of an organisation.
Risk management :-
Principles of an organisation helps to manage risks, and maintain ethical standards. Proper principles and policies can mitigate risks and ease proper functioning of an organisation. We can conclude that, principles of organisations provide a blueprint for smooth functioning of an organisation by continuous improvement, effective co-ordination, improved communication proper understanding of responsibility, proper work towards achieving common goals etc.
By doing according to their principles, organisations can improve their performance, achieve goals, and sustain in the changing and competitive environment. By keeping these fundamental principles in mind, organisations can create a foundation for success in the modern and competitive world and that will last forever.
You can also check:-