Accounting principles are not rigid

4.Accounting principles cannot be validated by reference to natural laws.

5.Accounting principles are not rigid.

Classification :

Traditionally, accounting principles were classified into two categories :

i. Accounting Concepts and

ii. Accounting Conventions

The International Accounting Standard (IAS-I) has classified the accounting principles into :

I. Fundamental Accounting assumptions (Concepts) and

II. Accounting Policies (Conventions)

1.Classification ofAccounting Concepts:

i. Entity Concepts, ii. Money measurement Concepts, iii. Going Concern Concepts, iv. Accounting Period Concept, v. Accrual Concept, vi. Dual Aspect Concept, vii. Cost Concept, viii. Matching Concept, ix. Realization Concept.

2.Classification ofAccounting Conventions:

i. Conservatism, ii. Consistency, iii. Materiality, iv. Full Disclosure.

Difference Between Accounting Concepts and Conventions :

1. The main point ofdifference between accounting concepts and conventions is hat accounting concepts are officially recorded, whereas accounting conventions are not recorded officially and are followed as generally accepted guidelines.

2. Accounting concepts have been established by professional organizations and are standard principles that must be followed when preparing financial accounts. Whereas, conventions are the generally accepted practices that can change and updated over time, depending on the change in the financial landscape.

3. In the case ofthe accounting concepts, one has to follow all the concepts, there is no choice to leave any. Whereas, in the case ofaccounting conventions, there is a choice to select a particular concept.

QuickRevision

Accounting principles refer to those rules and regulations that are universally followed by the accountants for recording accounting information. They play the role of guidelines for recording and reporting financial transactions.

In other words, the accounting principles are the common rules that that are universally adopted by the accountant while compiling the financial statement that is distributed to people outside the business concern.

Features :

1. Accounting Principle is Man-Made: They are the best suggestions based on practice and assumption. They are helpful it used by all enterprises since they ensure uniformity and understandability.

2. Accounting Principles are time-based techniques: Accounting principles may change to improve the quality ofaccounting information with time.

3. Accounting principles are universally Accepted: Accounting principles are generally accepted guidelines for accounting. The principle becomes generally accepted ifit meets three content, relevance, objectivity, and feasibility.

Characteristics :

1. Accounting is the language ofbusiness.

2. These principles/rules have been developed with the main aim to maintain uniformity in the accounting practices.

3. Generally, the term ” principle” refers to the fundamental beliefor a general truth which ance established does not change.

4. Accounting principles are still evolving in nature.

5. Accounting principles can not be validated by reference to natural laws.

6. AICPA stands for the American Institute ofCertified Public Accountants.

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