1. The chief objective behind the accounting principles is that the accounting statements should
be both reliable and informative.
2. The term ‘Accounting Concept’ refers to assumptions and conditions on which accounting is
based.
3. Financial statements of a Sole Proprietor or Partnership firm are open documents, available
for inspection to the public.
4. Accounting principles may be defined as those rules of action or conduct, which are adopted
by the accountants, universally, while recording the transactions in books of accounts.
5. Disclosure of contingent liabilities in the notes to accounts, not showing in the main accounts,
does not comply disclosure convention.
6. Accounting concepts and accounting conventions convey the same.
7. Dual aspect is the basic concept of accounting.
8. The term ‘accounting equation’ is used to denote the relationship of equities to assets.
9. Equities are of two types—owner’s equity and outsider’s equity.
10. According to the ‘Going Concern Concept’, business would continue to run, indefinitely, beyond
foreseeable future.
11. Cost concept is applicable to fixed assets as well as current assets.
12. Accounting conventions are the customs and traditions, which guide us in preparing accounting
statements.
36 Accounting for Managers
13. Conservatism concept emphasises that profit should never be overstated or anticipated.
14. Accountants follow the rule “anticipate no profit and provide for all possible losses”.
15. The concept of ‘Conservatism’ is otherwise known as ‘Prudence’.
16. If closing stock is valued, for a number of years, at cost or market price, whichever is lower,
the same principle cannot be changed at all in later years.
17. The question what constitutes a material detail is left to the subjective judgment of the
accountants.