Type of basic account concept

 Basic Account Concept 

1. Business Entity Concept

• The business is treated as separate from its owner(s).

• Personal and business transactions must be recorded separately.

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🔹 2. Money Measurement Concept

• Only transactions measurable in monetary terms are recorded.

• Non-quantifiable events (e.g., employee skill, morale) are not included.

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🔹 3. Going Concern Concept

• Assumes the business will continue operating in the foreseeable future.

• Assets are recorded based on their utility, not liquidation value.

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🔹 4. Accounting Period Concept

• Financial statements are prepared for specific periods (monthly, quarterly, annually).

• Helps in comparing performance over time.

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🔹 5. Cost Concept (Historical Cost)

• Assets are recorded at the original purchase price.

• Ignores current market value unless required (e.g., in fair value accounting).

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🔹 6. Dual Aspect Concept

• Every transaction affects at least two accounts.

• Basis of the double-entry system (Assets = Liabilities + Equity).

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🔹 7. Matching Concept

• Expenses should be recorded in the same period as the revenues they help to generate.

• Key for accurate profit measurement.

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🔹 8. Revenue Recognition Concept

• Revenue is recognized when earned, not when received.

• Usually recognized at the point of sale or service delivery.

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🔹 9. Accrual Concept

• Revenues and expenses are recorded when they occur, not when cash is received or paid.

• Enables better matching and period-based reporting.

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🔹 10. Conservatism (Prudence) Concept

• When in doubt, understate rather than overstate income and assets.

• Anticipate losses, but not gains.