Page 23 - ISCDEBK-XI

3.2 Double Entry Book Keeping—ISC XI
(iv) Accounting Period (or Periodicity) Concept. Life of an enterprise is divided into time intervals which
are known as accounting periods, at the end of which Income Statement and Position Statement
are prepared to show the performance and financial position.
(v) Complete or Full Disclosure Concept. According to this concept, the financial statements and
accompanying notes should contain a complete disclosure of all significant financial information.
Disclosure should be full, fair and adequate.
(vi) Revenue Recognition or Realisation Concept. According to Revenue Recognition Concept, revenue
is considered as earned on the date when it is realised. Revenue is generally recognised in case of
sales of goods when an exchange between buyer and seller has taken place and the earning process
of revenue is complete or virtually complete. Generally, revenue is recognised at the point of sales
or rendering services.
(vii) Verifiable Objective (Evidence) Concept. There must be objective evidence of transactions which
are capable of verification.
(viii) Matching Concept. Costs incurred during a particular period should be set out against the revenue
of that period to ascertain profits.
(ix) Historical Cost Concept. The underlying idea of Cost Concept is that the asset must be shown at
its cost price, which is the cost of acquisition less depreciation.
(x) Accrual Concept. This concept recognises revenues and expenses as they are earned or incurred
respectively ignoring the date of receipt or payment.
(xi) Dual Aspect Concept. Every transaction has two aspects: one aspect of a transaction is debited
while the other is credited.
(xii) Materiality Concept. Items or events having a significant effect need to be disclosed.
(xiii) Consistency Concept. Accounting practices once selected and adopted should be applied consistently
year after year.
(xiv) Prudence or Conservatism Concept. Do not anticipate profits but provide for all possible losses.
(xv) Timeliness. Provide the financial statements or information to users within a reasonable time.

The chapter introduces the students to:
• Generally Accepted Accounting Principles (GAAP). These principles are the basic or
fundamental propositions based on which transactions are recorded in the books of account
and financial statements are prepared.
• Accounting Concepts
 Going Concern Concept.
Under this concept, it is assumed that the enterprise will continue to operate indefinitely
in future and there is no intention to close or scale down its operations significantly. It is
because of this concept that assets are recorded at their historical value and depreciated
every year.
Going Concern Concept along with Accrual Concept and Consistency Concept, is a
fundamental accounting concept. It is recognised to be the fundamental accounting
concept by the Accounting Standard-1, Disclosure of Accounting Policies.
It is presumed to have been followed. It means that while preparing the financial
statements it is presumed to have been followed unless it is stated otherwise in the
financial statements, i.e., the enterprise is not a going concern. If the enterprise is not
a going concern, the financial statements will be prepared differently than the regular
financial statements.