What are Accounting Concepts, Principles & Conventions?
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# Accounting Concepts:
## Meaning:
* Accounting Concepts is generally used to mean a 'Notion' only or mental idea about something.
* It is a principle which is taken to be self-evident or axiomatic (i.e., something which does not require to be proved) which has already been proved to be true.
* In other words, it may be an assumption or axiom constituting the supposed basis of a system.
* It is considered to be of a more fundamental character and universally acceptable which may be applied in all possible cases. It will have greater general applicability.
* These postulates are either descriptive (explanatory) or suggestive (normative).
* There is no authoritative list of these concepts.
# Accounting Principles: ## Meaning: * Accounting principles are the norm or rules which are to be followed in treating various items of Assets, Liabilities, Expenses, Incomes etc. * Ex. (i) Inventory should be valued at lower of cost & net reliable value. (ii) Fixed Assets should be depreciated over its useful life, (iii) Valuation norms for current & permanent investments etc. * An accounting principle can have alternative methods to apply it. Like in case of inventory we have methods of cost measurement by FIFO or weighted average.
# Accounting Conventions: ## Meaning: * It refers.to the general agreement on the usage and practices in social or economic life, i.e., it is a customary practice, rule, method or usage. * In other words, it is an accounting procedure followed by the accounting community on the basis of long-standing customs.
# Accounting Principles: ## Meaning: * Accounting principles are the norm or rules which are to be followed in treating various items of Assets, Liabilities, Expenses, Incomes etc. * Ex. (i) Inventory should be valued at lower of cost & net reliable value. (ii) Fixed Assets should be depreciated over its useful life, (iii) Valuation norms for current & permanent investments etc. * An accounting principle can have alternative methods to apply it. Like in case of inventory we have methods of cost measurement by FIFO or weighted average.
# Accounting Conventions: ## Meaning: * It refers.to the general agreement on the usage and practices in social or economic life, i.e., it is a customary practice, rule, method or usage. * In other words, it is an accounting procedure followed by the accounting community on the basis of long-standing customs.
About This Chapter: Theoretical Framework
Paper
Paper 1: Accounting
Weightage
5-10%
Key Topics
Policies, Standards (Ind AS), Vocabulary
This chapter covers Policies, Standards (Ind AS), Vocabulary and is part of Paper 1: Accounting in the CA Foundation exam.
View Official ICAI SyllabusExam Strategy Tip
This topic carries 5-10% weightage. Focus on understanding core concepts rather than memorizing.
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