ACCOUNTING CONCEPTS AND CONVENTIONS

INTRODUCTION
In all activities (whether business activities or non-business activities) and in all organizations (whether business organizations like a manufacturing entity or trading entity or non-business organizations like schools, colleges, hospitals, libraries,clubs,temples, political parties) which require money and other economic resources, accounting is required to account for these resources. In other words, wherever money is involved, accounting is required to account for it. Accounting is often called the language of business. The basic function of any language is to serve as a means of communication. Accounting serves this function and much more.
Accounting is an art of recording, classifying, analyzing and summarizing in a significant manner and in terms of money, transactions and events which are in part, at least, of a financial character, and interpreting and communicating the results thereof. There are certain guidelines and practices that are followed while recording transactions and in preparing financial statements. Such guidelines and practices have been developed on the basis of globally accepted accounting standards. Such principles are called Generally Accepted Accounting Principles (GAAP). GAAP’s foundation is built on the basic principles of accounting concepts, conventions and accounting standards.
Accounting principles refers to certain rules, procedures and conventions which represent a consensus view by those indulging in good accounting practices and procedures. To be more reliable, accounting statements are prepared in conformity with these principles. But in reality as all the businesses are not alike, each one has its own method of accounting. However, to be more acceptable, the accounting principles should satisfy the following three basic qualities, viz., relevance, objectivity and