GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(GAAP)
(CONCEPTS, CONVENTIONS AND POLICIES)
Accounting is the language of business. To make the language convey the same meaning to all people all over the world have developed certain rules, procedures and conventions, which represent a consensus view by the profession of good accounting practices and procedures and are generally referred to as Generally Accepted Accounting Principles(GAAP).
Accounting principles can be classified into two categories
1.Accounting concepts, and
2.Accounting conventions
1.Accounting Concepts
Accounting concepts may be considered as postulates i.e., basic assumptions or conditions upon which the science of accounting is based. There is no authoritative list of these concepts but most of the following concepts have fairly general support.
Various accounting concepts are as follows
a.Business Entity
b.Money measurement
c.Going concern
d.Cost
e.Dual Aspect
f.Accounting period
g.Matching
h.Realisation
i.Objective Evidence
j.Accrual
2.Accounting Conventions
The term 'convention' denotes circumstances or traditions which guide the accountants while preparing the accounting statements.
Various accounting conventions are as follows.
a.Consistency
b.full disclosure
c.conservatism
d.materiality