Showing posts with label Accounting Principles. Show all posts
Showing posts with label Accounting Principles. Show all posts

Sunday, March 3, 2019

Economic Entity Principle or Business Entity Assumption

Accounting , Accounting Principles
Economic Entity Principle or Business Entity Assumption

Economic Entity Principle or Business Entity Assumption

  • Recording of financial transactions of business entity should be kept separate from the owner’s personal financial transaction recording.
  • The transaction should not be mixed.
  • Asset, Liabilities, Cash transaction, Bank accounts should be kept separate.
  • This should be maintained strictly as owner and business entity pays TAX separately.  

The economic Entity principle is also known as business entity assumption.



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Wednesday, February 27, 2019

Accrual Principle

Accounting , Accounting Principles
Accrual Principle
Accounting principles


Accrual Principle: It is the theory of recording an accounting transaction in the time period in which they occurred. Not in the previous period or next period. Suppose, you may receive the money in the next period or during the previous period as buying and selling occur a whole year in business. But you have to record the transaction in that period in which your invoiced the customer or you have got an invoice from the supplier. You have to be careful about the dates.
The main reason for doing this is matching the revenue with expenses of that specific period.

For example, You have got a gas bill for the month of June and you have not paid this yet (in the month of July). Say, You are going to pay it in the month of August. Your accounting period is from July to June. You should not recognize this in the month of July or August. It should be recognized in the previous period (in 30'June)



Accrual accounting should apply to revenue, expenses, bad debt, depreciation, Commission and wages.

Know more about Accrual and Cash Basis Accounting Principle and Revenue recognition principle 




Accrual Principle


Tags: Accrual Principle, accrued expenses, revenue recognition principle, accrual accounting examples, accrual booking, accruals accounting meaning, accrual accounting examples




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Tuesday, October 30, 2018

Going Concern Assumptions

Accounting , Accounting Principles
Going Concern Assumptions
Definition: The going concern assumption is the concept which assumes that, the business entity will be running for long time or foreseeable period. Which companies are gonna end soon or close in the near future are not going concern.





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Sunday, July 22, 2018

Economic Entity Assumption Principle

Accounting Principles ,
Economic Entity Assumption Principle
Definition: It is also called business entity assumption. A business entity is separate from owner. This is applicable to any types of business like companies, schools, hospitals, NGO's etc.

Business transactions are totally separate from the owner's personal transactions. This principle is also applicable to sole trader business but it becomes more complex in this situation.

So, business records should be kept separate and should not mix with sole trader owner's personal records.

Assets and Liabilities of  a business entity are different  from owner's personal asset and liabilities.

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