Accounting Concepts - What are the accounting concepts used by accountants
The term given to the main accounting rules or conventions that should be applied when preparing financial statements and accounts. Accounting concepts are universally applied by accountants in the preparation of the statutory accounts.
Though all of the rules can be applied and accounts professionals will consider all of the principles when considering the accuracy of the accounts before them, some rules may seem to conflict with each other. For example if a company has a turnover of £100million and the accounts do not record a provision for a bad debt of £100, using the prudency concept, the accounts should record the bad debt provision.
However an accountant will apply the materiality concept in this instance. The fact that the organisation has not recorded a provision for a bad debt in its accounts of such a small amount is basically neither here or there. In this instance the accountant or auditor will record the fact that the provision has not been made. But it will not influence his statement as to whether or not the financial statements provide a true and fair view.
- Materiality - For a detailed explanation of the materiality concept please see the seperate materiality defintion.
- Prudence - Please refer to the prudence concept page for a detailed exlanation on how the prudence convention is applied when preparing financial statements .
- Matching - Please see matching convention page.
- Accruals - An important concept used to prepare financial statements. Please refer to the accruals concept detailed defnition page.
- Going Concern - Please see Going Concern Concept page.
- Cost Basis - Please refer to our Cost Basis Convention page
- Entity - For a detailed explanation of the entity concept please see our Entity concept definition
- Full Disclosure - Please see Full Disclosure rule
- Lower Of Cost or Market Value - Please see the Lower Of Cost or Market Value page.
- Money Measurement - Please refer to the Money Measurement Concept page.
- Unit Of Measurement - Please see our Unit of Measurement Concept page where the topic is discussed in further detail
- Realisation - Please see our Realisation Concept page.
- Objectivity - Please see our Objectivity Concept page where the convention is discussed further.
- Monetary Mearsurement - Please visit our Monetary Measurement Concept page.
- Maintenance Of Capital - for further information please go to our Maintenance of Capital Concept page.
- Accounting Period - Refer to the Accounting Period Concept page for further detail.
- Accounting Equation - Please see the Accounting Equation Convention page.