Accounting concepts are a set of general conventions that can be used as guidelines when dealing with accounting situations. These concepts have also been integrated into the various accounting standards, so that a user will not implement a standard and then find that it is in conflict with one of the accounting concepts. The key accounting concepts are as follows:
Accounting information should be complete in all respects.
Accounting information should be made available to users on a timely basis.
Accounting information should be presented in a manner that is easily understandable to the user.
Accounting information should be relevant to the needs of users.
Accounting information should be reliable.
Accounting information should contain no biases.
Accounting information should faithfully represent the related business transactions.
Accounting policies should be consistently applied over time, so that financial statements are consistent and comparable.
A business transaction should only be recorded when it can be measured in a currency.
Financial statements are prepared under the assumption that a business will be a going concern.
Information should be reported if its absence would otherwise cause a user to make a different decision.
Revenue estimates should not be overstated, nor should expense estimates be understated.
Revenue should be recognized only when it has been earned.
The financial statements of a business are to be based solely on the entity’s own transactions, and will not be intermingled with those of its owners.
The underlying substance of a transaction is to be reported, rather than the legal form of the transaction.