The Going Concern assumption is fundamental to accounting. It implies the entity has neither the intention nor the need to liquidate or curtail materially the scale of its operations. This justifies charging depreciation over useful life rather than liquidation value.

The Dual Aspect Concept states that every transaction has two effects: a debit and a credit of equal amount. This forms the basis of Double Entry Bookkeeping and the Accounting Equation.

Transactions are first recorded in the Journal (Original Entry), posted to the Ledger (Classification), summarized in the Trial Balance, and finally analyzed in Final Accounts.

Accrual basis records transactions when they occur (mercantile system), not when cash changes hands. This gives a truer picture of profit/loss.

Consistency ensures that financial statements are comparable over different periods. Frequent changes in methods (e.g., depreciation from SLM to WDV) distort comparison.

Accounting only records transactions that can be expressed in monetary terms. Crucial qualitative factors that affect business success are often not reflected in the books.

Accounting should focus on information that is "material" (significant) to the user. For example, a calculator bought for office use is expensed immediately rather than depreciated over 5 years because the amount is immaterial.

Real Accounts relate to assets and properties (Tangible or Intangible). Cash is a tangible asset. Salary is Nominal (Expense). Ram is Personal. Overdraft is Personal (Liability).

Conservatism states: "Anticipate no profit, but provide for all possible losses." Creating a provision for bad debts anticipates a future loss.

Transactions are recorded chronologically in the Journal first, hence it is the Book of Original Entry. The Ledger is the Book of Final Entry.

Revenue is considered realized when the title of goods passes to the buyer, creating a legal obligation to pay. Cash receipt is not necessary.

This concept is the foundation of the Double Entry System. Accounting Equation (Assets = Liabilities + Equity) is derived from this.

Since the business and owner are separate entities, the money given by the owner to the business is a claim the owner has on the business, hence a Liability (Internal Liability).

Cash basis records transactions only when cash flows. Expenses incurred but not paid (outstanding) are ignored until paid. Accrual basis records them.

Though the pen is an asset, its cost is immaterial. Tracking its depreciation is not worth the effort. Hence, Materiality allows it to be expensed.

Realization usually occurs when goods are transferred to the buyer, transferring risks and rewards. This creates the legal right to receive payment.

Assets are recorded at the price paid to acquire them, not at their changing market values. This ensures objectivity.

To provide timely information, the indefinite life of a business is cut into smaller periods (typically 12 months) for reporting.

Cash (Asset) comes in (+10,000), and Bank Loan (Liability) is created (+10,000). Equation balances.

Example: In a Finance Lease, the lessee records the asset even though legal title is with the lessor, because in substance/reality, the lessee uses it.

The fundamental accounting equation is Assets = Liabilities + Capital. Therefore, A+L=C is mathematically incorrect.