Class 11 Commerce Accounts notes are essential for students aiming to build a strong foundation in accounting principles. These notes cover fundamental concepts like journal entries, ledger accounts, trial balance, and financial statements. Understanding these basics is crucial for advanced topics ...
The theoretical basis of accounting refers to the principles, concepts, and assumptions that underpin the
practice of accounting. These theoretical foundations provide a framework for how financial
transactions should be recorded, summarized, and reported in order to ensure consistency, reliability,
and comparability of financial information.
Here are the key components of the theory base of accounting:
1.Generally Accepted Accounting Principles (GAAP): GAAP are a fixed of accounting
standards, concepts, and tactics that are broadly popular and universally practiced in the
accounting career. They offer guidelines on the way to prepare economic statements, handle
unique transactions, and make sure consistency in monetary reporting.
2.Accrual Basis vs. Cash Basis: Accounting idea distinguishes among the accrual foundation
and cash foundation of accounting. The accrual basis recognizes revenues when they are earned
and charges while they're incurred, no matter when cash is truly obtained or paid. This method
pursuits to offer a more accurate depiction of a corporation's economic role and overall
performance over a time frame. In contrast, the coins foundation facts sales and fees simplest
when coins is obtained or paid, which may be simpler but may not reflect the actual financial
pastime of a enterprise.
3.Entity Concept: According to this concept, the business entity is taken into consideration
break away its owners or stakeholders. This precept ensures that the monetary transactions of the
enterprise are recorded and stated independently of the non-public transactions of its proprietors.
4.Going Concern Concept: This idea assumes that a enterprise will maintain to function
indefinitely unless there's evidence to the opposite. It allows accountants to prepare monetary
statements underneath the belief that the business will stay operational for the foreseeable
destiny, thereby affecting how property and liabilities are valued and pronounced.
5.Consistency Principle: Accounting theory emphasizes the significance of consistency in
making use of accounting regulations and techniques from one duration to any other.
Consistency guarantees that financial statements are similar over time, permitting stakeholders to
assess.
Features of Accounting Principles:
1. Accounting principles are man made.
2. Accounting principles are generally accepted .
3. Accounting principles are flexible in nature.
Need of Accounting Principles
To make the accounting information meaningful to its external and internal users, it is necessary
that financial statements are prepared according to these principles.
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