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Accounting Concepts
and Convention
基本會計概念及慣例
References：Chapter 12 (p. 235)
參考書目：第12章 (p. 250)
1
A
Objectivity (客觀性) and
Subjectivity (主觀性)
• Objectivity is enhanced by using
methods that are generally agreed.
• Generally agreed method is not
used, it is regarded as subjective.
2
B
Concepts and Convention
• Concept is an idea or abstract
principle which relates to a
particular view of a subject.
• Convention refers to the ways of
thinking and behaving that are
believed to be normal and right by
most people in a particular field
3
C
1.
2.
3.
4.
5.
6.
7.
8.
9.
Basic Accounting Concepts
Business entity concept
Dual aspect concept
Money measurement concept
Historical cost concepts
Going concern concept
Concept of stable monetary measures
Realisation concept
Accrual concept
Matching
4
1
Business Entity Concept
(企業個體概念)
• Business entity concept only
concerns the transactions which
affect the firm but not the owner’s
personal transactions.
• e.g. The motor vehicle owned by
the proprietor do not record in the
books of the company.
5
2
Dual Aspect Concept (複式概念)
• Dual aspect concept states that
there are two aspects of accounting,
i.e. the assets of a business and
the liabilities and / or capital of
the business.
6
3
Money Measurement Concept
貨幣量度單位概念
• Money measurement concept
concerns only with transactions
measurable in units of money, on
which general agreement can also
be obtained.
• e.g. quality of management, morale
of the workforce
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4. Historical Cost Concept
成本概念
• Historical cost concept states that
assets are normally shown at their
original costs of acquisition.
• E.g. A motor vehicles (Fixed asset)
was recorded at the cost when
acquired.
8
5
Going Concern Concept
繼續經營概念
• Going concern concept states that a
business is assumed to continue to
operate in the foreseeable future.
• E.g. The assets are recorded at
their original cost rather than their
current market values in the book,
even the business is operating at a
loss for years.
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6 Concept of stable monetary measures
貨幣穩定假設
• The concept of stable monetary
measures assumes that the value or
purchasing power of money is constant
ignoring the effects of inflation or
deflation.
• E.g. Two motor vehicles were bought in
2001 and 2008, the purchasing power
were different in two years. But under
the concept of stable monetary measures,
the values of two motor vehicles allows
to record without any adjustment.
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7
Realisation concept 變現概念
•
Realisation concept specifies the
point of time at which revenue
should be recognised and recorded
in the book. It usually refers to
the point of time when:
1. Goods or services are passed to the
customers, and
2. The customers incur liability to pay.
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8
Accrual Concept 應計概念
• Accrual concept states that revenues
and expenses are recognised in the
profit and loss account for the period
in which they have been earned or
incurred, not when they are received.
• Under this concepts, accruals and
prepayments are arouse.
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9 Matching Concept
• Matching concept sates that revenue
should be linked with its relevant
expense or cost in the same period.
• Commission is the relevant expenses of
Sales. (Commission is matched with
Sales.)
• Depreciation of motor vehicle is matched
with the time.
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D
Accounting Convention
• Materiality / Conservatism
• Prudence
• Principle of Consistency
14
1
Materiality 重點鉅數
• Materiality concept is used to judge
what sorts of transactions or items are
significant and their classification in the
financial statements.
• e.g. A box of paperclips can be used for
several years. It will not be recorded
as fixed assets, because of its
immaterial value.
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2
Prudence / Conservatism
穩健保守
• Prudence concept ensures that the
net assets and profits of a business
are not overstated.
• Thus, revenues should not be
anticipated; Expenses should be
anticipated.
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3
Principle of Consistency 一致性
• Consistency is to keep using the
same accounting method on similar
items, except for special cases.
• e.g. A company depreciates the
machinery by using reducing balance
method. The proprietor want to
overstate the profit by changing
the depreciation method. This
violates the principle of consistency.
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