Accounting assumptions

Modern accounting is based on certain assumptions for keeping systematic record of financial transactions. The Accounting concept refers the basic accounting rules and assumptions for recording financial transactions .Without accounting concept, we cannot keep systematic and proper accounting. Some of the basic accounting concepts or assumptions are as follows:

a)Business Entity concept:

Importance or advantages of accounting

The importance or advantages of accounting are as follows:

a)Complete record: Accounting facilities the replacement of human by maintaining complete record of financial transactions. Human memory is limited by its very nature. Accounting helps to overcome this limitations.

b)Knowledge of profitability: Accounting facilities to ascertain net results about the profit or loss of operation by preparing profit and Loss Account or Income Statement.

c)Knowledge of financial positions:

Scope of Accounting

The scope of accounting indicates field or area where accounting is used. The scope of accounting is very wide .It is applicable not only to business organizations ,but also to non-business organizations, government and non-governmental organizations ,various professionals and individuals in their monetary affairs. Generally, it covers the following areas:

Objectives or functions of Accounting

Accounting has the following main objectives or functions:

A)To keep complete and systematic records: The first aim/objectives or function of accounting is to keep systematic and complete record of all financial transactions for future reference  and also to avoid the possibility of errors and frauds .First of all, it records all financial transactions in journal and then after they are posted into ledger as per specified rules and principles.

B)To ascertain profit or loss: The second objectives or function ot accounting is to ascertain operating result i. e, profit or loss of a business for a period.

Concept And Meaning of Account

Generally ,book-keeping is the first stage of Accounting. Accounting begins when book-keeping ends. It means the term ‘Accounting’ has a broader meaning as compared to Book-Keeping. Book-Keeping is mainly concerned with systematic and scientific recording of business transactions and their classification. But Accounting goes beyond this and further includes summarizing ,analysis identifying,measuring,recording