Accounting Concepts

Abstract

Although you may not have been aware of it, you have already been applying certain accounting concepts when you were preparing accounting statements in your earlier studies. Examples of this are in valuation of stock and depreciation of fixed assets. The method of dealing with these operations has arisen from generally accepted accounting concepts. One further example is the differentiation between capital and revenue expenditure, where such expenses as rent and wages have been treated as revenue expenditures and have been taken account of in the calculation of the net profit. Capital expenditures — for example, fixtures — have been treated as an asset and have not been taken account of in the profit calculation (except by way of depreciation).