Money measurement concept: money measurement concept holds that accounting is really a measurement and communication procedure for those activities from the firm which are measurable in financial term. Thus only such transactions and occasions could be construed when it comes to money and recorded. Occasions which can’t be expressed in money terms don’t find devote the books of accounts though they might be essential for business. Non-financial occasions like dying, dispute, sentiments, efficiency etc. aren’t recorded within the books, despite the fact that these could have great effect. Accounting therefore doesn’t provide a complete account from the occurrences in business or perhaps an accurate picture from the conditions from the business. Thus accounting details are regarded as basically financial and qualified.
Any unit of measurement during a period of the years have its disadvantages.
Though a globally acceptable way of measuring value, it is affected with territorial limitation. It will get affected seriously by economic variations between various areas in addition to social and political variations.
Cost concept: this idea is carefully associated with going concern concept. Based on this idea an resource is ordinarily joined within the accounting records in a cost compensated to get it which price is the foundation for those subsequent comprising the assets. If your business buys a stretch of land for $50,000 the resource could be recorded within the books at $50,000 only even when its market price is actually $60,000, just in case placing year when the market price from the resource comes lower to $40,000 it’ll ordinarily continue being proven at $50,000 within the books. The price concept does not necessarily mean the resource will be proven at cost. It has additionally been mentioned above that cost becomes the foundation for those future comprising the resource. This means that resource is recorded at cost during the time of its purchase
however it may methodically be reduced in the value by charging depreciation.
Dual aspect concept: based on this idea watch transaction includes a dual effect. Eg. An individual begins a company with capital of $10,000. You will find two facets of this transaction. On one side business has resource of $10,000 however business needs to spend the money for liability of $10,000 towards the proprietor. The word assets denotes the assets possessed through the business as the term equity denote the claim of numerous parties from the assets. Equity is of two sorts: Owner equity and outdoors equity.
Owner equity may be the claim of proprietors from the assets from the business while outsides equity may be the claim of outdoors parties for example creditors, debentures holders etc. since all assets from the business are stated by someone, the entire of assets is going to be comparable to the
total of liabilities.
Liabilities + Capital = Assets
Within the example given above when the business purchase furniture worth $5000 supplied by
the dog owner the problem could be written as:
(Capital) $10,000 = (Cash) $5000 + (Furniture) $5000