• Refers to the rules and actions adopted by the accountants globally for recording accounting transactions.

"principles of the accounting are general law or rule adopted or proposed as a guide to action, a settled ground or basis of conduct or practice."

•It is a body of doctrine.

• commonly used associated with the theory and procedure of accounting.

• These principles are classified into two categories:

   。Accounting concepts

   。Accounting convention

• defines the assumptions on the basis of which financial statements of business entity are prepared.

• concept means Idea or notion which has Universal application.

• It mainly helps in the recording of business transaction and preparing final account.

• business entity concept, cost concept, going concern concept, dual aspect concept, matching concept etc.

lt emerge out of accounting practices adopted by various organisation over a period of time.

• focus on the preparation and presentation of financial statements.

• It need not have Universal application.

• Convention denotes customs or tradition or usages which are in use since long.

• Accounting conventions are

 ○ Consistency

 ○ Disclosure

 ○ Conservatism &

 ○ Materiality

Accounting concepts are the basic assumptions on which accounting operates. 

These are the following accounting concepts :

<br/>

1.The business entity concept: According to this, the business and owner are separate entities. Business transactions are recorded in the books of accounts from the company’s point of view, and not the owner’s. The owners are considered separate from their business’s point of view and are regarded as creditors to the extent of their capital.

2.The money measurement concept: According to this, transactions and events are measured in monetary terms in the books of accounts of the enterprise.

3.The going concern concept: Under this concept, it is assumed that the business will continue for an indefinite period, and there is no intention to close the business or cut down its operations significantly.

4.The accounting period concept: According to the accounting period concept, the life of an enterprise can be broken into smaller periods, usually termed accounting periods, so that its performance is measured at regular intervals.

5.The cost concept: According to this concept, an asset is recorded in the books of account at the price paid to acquire it, and the cost is the basis for all following accounting of the asset.

6.The dual concept: According to the dual aspect concept, every business transaction entered into by the organisation has two aspects, a debit and an equal creditor amount. For every debit, there will be an equal amount of credit.

7.The revenue recognition concept: Revenue recognition is an accounting concept that determines when a company can record income. It emphasizes recording revenue when it's earned, not just when cash is received. This ensures a clearer picture of a company's financial health.

8.The matching concept: Here, it is ascertained that every cost incurred to earn the revenue should be recognised as an expense in the accounting period when revenue is earned. In a given accounting period, expenses are matched with the revenue earned.

9.The accrual concept: A transaction is said to be accrued if a transaction is recorded at the time when it takes place and not at the time when the settlement takes place.

10.The verifiable objective concept: The verifiable objective concept states that accounting should be free from personal bias. 

The guidelines that are followed to prepare financial statements are called accounting conventions. These are as follows:

1.Full disclosure: Convention of full disclosure states that there should be complete reporting on the financial statements of all important information relating to affairs of the business. All the material facts are to be disclosed.

2.Consistency: Convention of consistency states that accounting practices, once selected and adopted, should be followed consistently year after year for a better understanding and comparability of the accounting information.

3.Prudence concept or conservatism concept: This convention states that we should not anticipate a profit before its realisable but provide for all possible losses which might occur in the course of business.

4.Materiality concept: The materiality concept relates to the relative information of an item or an event. An item is considered material when such knowledge of that could influence the decision of an investor.