Basic Concept of Accounting

 Basic Concepts of accounting

The first concept is every transaction has dual aspects one is debit and other is credit .one can say that every debit has a credit . The debit side of trial balance must be equal to the credit side. if both side of trial balance is not equal it means that some accounts have been omitted. Similarly the debit side of the balance sheet must be equal to the credit side of balance sheet.

The second important concept is matching concept that revenue is accounted for in same period in which related expenditure is accounted for in books of account.

The third important concept is accrual concept, that books are maintained on the bases of events of financial transaction and not on the bases of cash paid or received.

The fourth important concept is that financial transaction must be reflected in book of account on bases of their financial substance and not merely on bases of its legal form. This concept is called substance over form


The fifth important concept is that expenses and liabilities must not be understated and revenue and assets must not be overstated. The concept is called prudence concept.