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P2 C6 Conventions, Assumption. Concepts and Principles ofAccounting — Account STD 11 Commerce — Question

Gujarat BoardEnglish MediumSTD 11 CommerceAccountP2 C6 Conventions, Assumption. Concepts and Principles ofAccounting3 Marks
Question
Explain the need for accounting principles or concepts or conventions or postulates orassumptions that are use while writing accounts and in preparing financial statements.
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Answer

To ensure uniformity in accounting, certain accounting principles are used while writingaccounts and in preparing financial statements. The terms, principle, concept, convention,doctrine, postulate and assumption are sometimes used interchangeably. If these principlesare not uniformly understood, accepted and adopted by all, different authors classify theseaccounting principles differently. However, without classifying them separately as principles,concepts, conventions, doctrines, postulates and assumptions, some such concepts are given below: $(1)$ The accounting principles provide a theoretical and logical base to accounting. $(2)$ Accounting science is based on these concepts, conventions, assumptions & principles.It is useful as the language of business. $(3)$ Generally, accepted set of rules can provide a unity of understanding and also a unityof approach in the practice of accounting. $(4)$ In developing the structure of accounting theory and to related the theory to accountingpractice. $(5)$ Only if they are understood by those who write the accounts and users of accountinginformation in the same way. $(6)$ Therefore, the basic accounting principles, concepts and conventions are of utmostimportance.

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