Generally Accepted Accounting Principles (GAAP), 1. Business Transactions and Source Document, 2. Theory Base of Accounting contains accounting principles, concepts, standards, etc that help to understand the basics of accounting. Significance of Agreement of Trial Balance, 4. Effect of any Addition or Extension to the Existing Asset, Either in the body of the financial statements, or, In notes accompanying such financial statements. Theory of Accounting includes: (adsbygoogle = window.adsbygoogle || []).push({}); Let us understand these one by one. In simple words GAAP is a global language of accounting professionals. (adsbygoogle = window.adsbygoogle || []).push({}); g) Revenue Recognition Concept: Revenue means cash inflow generated from sale of goods or services. It is also called a Historical Cost. d) Materiality: As per the accounting convention of materiality, an item is material if it can influence the decision of users of the financial statements. Many countries around the world have adopted the International Financial Reporting Standards. For instance, for a small company Rs. Thus, for the purpose of accounting, business and its owners are to be treated as two separate entities. a) Full Disclosure: This convention entails the revelation of all relevant information, both favorable or unfavorable to the management of a business enterprise. Thus, generally accepted accounting policies are rules to ensure consistency among different financial statements. Moreover, the convention of consistency helps the management to analyze the financial statement of different periods and based on which future decisions can be taken, if needed. Unit Number 319, Vipul Trade Centre, Sohna Road, Gurgaon, Sector 49, Gurugram, Haryana 122018, India, Monday – Friday (9:00 a.m. – 6:00 p.m. PST) Saturday, Sunday (Closed), 1. There are four Accounting conventions which are listed below. Methods of Calculating Depreciation Amount, 9. It has no intention to liquidate. 100 transaction is material whereas for big giants Rs. c) Conservatism: As per the Conservatism convention at the time of recording any financial transaction, you should recognize no profit but provide for all possible losses. Therefore, in case of credit sales revenue is generated when sales are made irrespective of whether cash is received or not. Changing the accounting method often or every year would make the comparison of its own financial statements of different period difficult for the company. This aspect also gives us Accounting Equation. Full disclosure can be made in two ways: b) Consistency: According to the convention of consistency the company has to follow a method of accounting consistently. Also rounding off to nearest rupee and ignoring paise is also matter of materiality. These concepts / Principles are listed below. For E.g. All rights reserved. © 2020, Arinjay Academy. © 2020, Arinjay Academy. Accounting principles - ACCOUNTANCY FOR CLASS 11 Summary of Accounting Principles and concepts 1.Business Entity : This concept assumes that business has distinct and separate entity from its owners. h) Matching Concept: These concepts emphasize that all the expenses incurred during the accounting period by the business entity, whether paid or not and all the revenues earned by the entity during the accounting period, whether received or not, should be considered or recorded so as to arrive real profit of that year. This concept tells us that revenue generated by business should be included in accounting only when it is realized. Objectives of Preparing the Trial Balance, 3. Method of Depreciation or method of inventory valuation. Generally Accepted Accounting Principles (GAAP), 1. Business Transactions and Source Document, 2. Objectives of Preparing the Trial Balance, 3. Chapter 6 -Trial Balance and Rectification of Errors, Chapter 7 – Depreciation, Provisions and Reserves. CBSE Guide Theory Base of Accounting class 11 Notes CBSE guide notes are the comprehensive notes which covers the latest syllabus of CBSE and NCERT. This convention is related to the significant importance of any event or item. These are adopted to bring uniformity and consistency in the preparation and the presentation of financial statements by accountants. information required by tax authorities must be reported to them will be the full disclosure to Tax authorities. Introduction to Accounting, Theory Base of Accounting, Recording of Transaction - I, Recording of Transaction - II, Bank Reconciliation Statement, Trial Balance and Rectification of Errors, Depreciation, Provision, and Reserves, Bill of Exchange, Financial Statements - I, Financial Statements – II, Accounts from Incomplete … They are based on and adapted from the GAAP with modifications necessary for the Indian industries and other factors. Chapter 6 -Trial Balance and Rectification of Errors, Chapter 7 – Depreciation, Provisions and Reserves. Accounting principles | Accountancy | class 11 | part 1 - YouTube Home » Accountancy Class 11 » Basic Accounting Concepts. Theory base of accounting comprises concepts, conventions, principles, rules, standards and guidelines developed, to provide uniformity and consistency to accounting records and enhance its utility, to various users of accounting information. Preparation of Bank Reconciliation Statement, 2. CBSE Class 11 Accountancy is comprised of a total of 15 chapters, i.e. Moreover, the materiality of an item depends on its amount and an events materiality depends upon its nature. Like in India, Indian Accounting Standards (IAS) are issued by the Institute of Chartered Accountants of India (ICAI). That means minimum one debit and one credit, both of equal amount. Revenue is assumed to be realized when goods are sold or services are rendered. Preparation of Trial Balance – Trial Balance Questions, 4. Class XI Accountancy Notes and study material for Introduction to Accounting Chapter 1 Chapter 1 - Introduction to Accounting Accounting can be defined as the process of identifying, measuring, recording and communicating the required information relating to the economic events of an organization to the interested users of such information. 100 is immaterial. Basic Accounting Concepts - Accounting is based on some Principles which are based on some assumptions which are called Accounting Concepts Unit Number 319, Vipul Trade Centre, Sohna Road, Gurgaon, Sector (adsbygoogle = window.adsbygoogle || []).push({}); a) Business Entity Concept: This concept assumes that business and its owner are two different persons or entities. This convention depends upon the theory that the future is uncertain. Home » Accountancy Class 11 » Generally Accepted Accounting Principles(GAAP), Generally Accepted Accounting Principles (GAAP). There are 32 Indian Accounting Standards. acquisition cost. Materiality convention enables the users to ignore all such transactions or items that are not relevant or material. a.Business entity; b. For E.g. Factors Affecting the Amount of Depreciation, 5. Cost includes cost of acquisition plus all the expenditure incurred till making an asset in working condition. Check and download in pdf – National Significance of Agreement of Trial Balance, 4. Preparation of Bank Reconciliation Statement, 2. Methods of Calculating Depreciation Amount, 9. Preparation of Trial Balance – Trial Balance Questions, 4. It may happen that sale happens in the last week of March but money is received in the 1st week of April, still sale will be considered for the accounting year ending on 31st March and not for the next accounting year starting on 1st April. f) Dual Aspect Concept: According to this concept, every transaction in the business will have two effects. These basic accounting concepts are widely accepted all over the world by professionals. b) Money Measurement Concept: This accounting concept demands that only transactions which can be measured in monetary terms should be recorded in the books. Class 11 Accountancy notes on Chapter 2 Theory Base of Accounting class 11 Notes Accountancy are also available for download in CBSE Guide website. e) Cost Concept: According to this concept, an asset should be recorded in the books at its original cost at which it was bought i.e. Effect of any Addition or Extension to the Existing Asset, Systems of Accounting – Single Entry System. Non-monetary transactions should not be recorded even if they are significant. Money measurement; c. Going concern; d. Accounting period; e.Cost Concept f. Dual aspect; g.Revenue recognition (Realization); h. Matching; Accounting Conventions: Accounting convention frames the guideline that facilitates the preparation of accounting statements and reports.