Page 13 - IC26 LIFE INSURANCE FINANCE

6) Going Concern Concept: The financial statements are normally prepared on the
assumption that an enterprise is a going concern and will continue in operation for
the foreseeable future. It is assumed that the enterprise has neither the intention nor
the need to liquidate.

7) Cost Concept: By this concept the value of asset is to be determined on the basis of

historical cost or acquisition cost.

8) Realisation Concept: This concepts says that any change in the value of an asset is to

be recorded only when the business realizes it.

9) Dual Aspect Concept: Every transaction has two effects. This concept is the core of
double entry book keeping.
It gives the basic accounting equation = Equity + Liabilities = Assets

10) Conservatism Concept : This concept says that the accountant should provide for all

anticipated losses and should leave for all anticipated incomes.

11) Consistency Concept: In order to achieve comparability of the financial statements of

an enterprise through time, the accounting policies are followed consistently from
one period to another. This concept says that if there is any change in the accounting
policy, it should be disclosed.

12) Materiality Concept: It says that in the financial statements only those items should
be disclosed which had a significant material value. Items which accountant find

insignificant and unimportant should not be disclosed.

5. Fundamental accounting assumptions : There are three fundamental accounting
assumptions
(a) Going Concern

(b) Consistency

(c) Accrual

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