If all the business transactions are expressed in monetary terms, it will be easy to understand the accounts prepared by the business enterprise.

This concept states that a business firm will continue to carry on its activities for an indefinite period of time.

It helps in calculating tax on business income calculated for a particular time period.

This concept requires asset to be shown at the price it has been acquired, which can be verified from the supporting documents.

It encourages the accountant to post each entry in opposite sides of two affected accounts

It helps in knowing actual expenses and actual income during a particular time period.

It guides how the expenses should be matched with revenue for determining exact profit or loss for a particular period.

It is very helpful for the investors/shareholders to know the exact amount of profit or loss of the business.

Making the provision for doubtful debts and discount on debtors and valuation of the stock at cost price or market price which ever is less follows the convention of

According to this convention the accounting practices should remain unchanged from one period to another.

It takes into consideration all prospective losses but leaves all prospective profits

The purpose of this convention is to communicate all material and relevant facts concerning financial position and results of operations to the users.

As per this concept, all accounting must be based on objective evidence. In other words, the transactions recorded should be supported by verifiable documents.

It is because of this concept that fixed assets are recorded at their original cost and depreciation in a systematic manner without reference to their current realizable value.