Accounting Principles | Class 11 | Accountancy | Chapter 3 | Part 1

Summary

In this educational video, the instructor embarks on day 9 of the commerce pro series, aiming to complete the syllabus within 90 days. The focus is on chapter 3, 'Accounting Principles,' which will span two classes. The session delves into the foundational concepts of accounting, explaining the importance of principles as guidelines for decision-making and financial reporting. Key topics include the going concern assumption, consistency, and the accrual concept, setting a strong foundation for understanding accounting practices.

Takeaways

• 📚 The video is part of a commerce pro series aiming to cover the entire syllabus in 90 days, including subjects like accounts, business studies, and economics.
• 📈 The current session focuses on chapter 3, which is about accounting principles and is planned to be completed in two classes.
• 🏫 The instructor explains that accounting principles are fundamental rules and guidelines that help in decision-making and understanding the accounting process.
• 🌐 These principles are generally accepted worldwide, despite some variations from country to country, and are based on extensive study, analysis, and observation.
• 🔍 The principles are characterized by being uniform, man-made, flexible, and generally accepted, providing a solid foundation for solving accounting problems.
• 📝 The principles should be relevant, objective, and feasible, meaning they should be applicable, free from bias, and easy to use without complexity.
• 📑 The chapter discusses two types of accounting principles: accounting concepts or assumptions, and accounting conventions, which are based on professional experience and customs, respectively.
• 💡 Three fundamental accounting assumptions are introduced: going concern, consistency, and accrual concept, which are essential for the preparation of financial statements.
• 🏢 The going concern assumption implies that a business is expected to continue operating for the foreseeable future, which affects how assets and liabilities are accounted for.
• 🔄 The consistency principle requires that the same accounting methods be applied from one period to another to ensure comparability of financial statements.
• 💸 The accrual concept distinguishes between the cash basis and accrual basis of accounting, emphasizing the recording of transactions when they occur, not when cash is exchanged.

Q & A

What is the main focus of the video script?

The main focus of the video script is to introduce and explain accounting principles, specifically accounting concepts and assumptions, to students as part of a commerce pro series.

How many days does the instructor plan to cover the entire syllabus?

The instructor plans to cover the entire syllabus in 90 days, with the video being on day 9 of the series.

What is the significance of accounting principles according to the script?

Accounting principles are significant because they are a set of rules and guidelines that help in decision-making, understanding, and simplifying the process of accounting.

What does the term 'going concern' mean in the context of accounting?

The 'going concern' concept in accounting assumes that a business will continue to operate for the foreseeable future and won't be liquidated or significantly reduced in scale.

Why are accounting principles considered flexible?

Accounting principles are considered flexible because they can change over time as business practices, technology, and human behavior evolve.

What does the consistency concept require in accounting?

The consistency concept requires that once an accounting method or principle is adopted, it should be consistently applied from one accounting period to another.

What is the accrual concept and how does it differ from the cash basis?

The accrual concept requires that revenues and expenses are recorded when they are earned or incurred, not when cash is received or paid. This differs from the cash basis, which records transactions when cash is exchanged.

What are the three fundamental accounting assumptions discussed in the script?

The three fundamental accounting assumptions discussed in the script are going concern, consistency, and accrual concept.

Why is the 'full disclosure' convention important in accounting?

The 'full disclosure' convention is important in accounting because it ensures that all material information about a company's financial position is disclosed to users of financial statements.

What is the purpose of accounting principles according to the video script?

The purpose of accounting principles is to provide relevance, objectivity, and feasibility in the preparation and understanding of financial statements.

How are accounting principles developed?

Accounting principles are developed over a period of time through usage, experience, and statements from professional bodies, government agencies, and are generally accepted worldwide.