Advertisements
Advertisements
Question
Explain any two basic concepts of accounting.
Advertisements
Solution
- The Revenue Principle: This principle suggests that revenue should be treated as realised whenever the ownership of goods changes. It is immaterial whether the revenue is received in cash or not.
- The Expense Principle: According to this principle, every cost which is incurred to earn revenue is known as expense. Costs incurred on manufacturing, selling and distributing goods and services are expenses. Expenses should be recognised whenever incurred, irrespective of whether cash is paid or not.
APPEARS IN
RELATED QUESTIONS
Explain the need for GAAP for accounting.
The retirement of manager of the company cannot be recorded in the book of accounts, because it is not possible to estimate the financial effect of retirement. Which accounting principle would be applicable for the above statement?
Explain the concept of The Dual Aspect Principle.
Accounting principles are necessary due to which of the following reasons?
It is due to this concept that financial statements are prepared at regular intervals, generally one year.
What is meant by going concern concept of Accounting.
"Every transaction affects at least three accounts." Comment.
Explain the money measurement principle of accounting.
Explain the expense principle.
"The principle of full disclosure and principle of materiality are contradictory." Comment.
