1.1 Concepts

Question 1

Accounting Entity

Answer 1

The financial affairs of the entity are kept separate and distinct from the financial affairs of the owner

Question 2

Going Concern

Answer 2

The financial reports are prepared on the assumption that the life of the business is expected to continue to operate into the foreseeable future.

Question 3

Historical Cost

Answer 3

Transactions are recorded at the amount of cash paid or payable at the time of the transaction

Question 4

Reporting Period

Answer 4

The lifetime of the business is divided into nominated time periods of equal length, usually a year.

Question 5

Monetary Measurement

Answer 5

Financial transactions must be measured in a common currency such as NZ$ for New Zealand businesses

Question 6

Accrual Basis

Answer 6

Transactions are recognised when they occur and are recorded and reported in the financial reports of the period to which they relate