4. 13 Accounting Concepts

Question 1

What are the 6 Accounting Concepts?

Answer 1

• Consistency
• Prudence
• Accruals
• Materiality
• Money Measurement
• Business Entity

Question 2

What is consistency?

Answer 2

The consistency concept says that there should be a consistency in accounting methods.

Question 3

What is Prudence?

Answer 3

Prudence says that accountants should use a conservative approach when preparing financial statements and should not overstate revenue/assets and not understate losses and liabilities.

Question 4

What is Accruals?

Answer 4

The Accruals concept is the practice of recognizing revenues and their related expenses in the same accounting period in order to avoid misstating earnings for a period,

Question 5

What is Materiality?

Answer 5

Materiality is the concept applies when the value of an item is relatively small and does not warrant separate recording,

Question 6

What is Money measurement?

Answer 6

Money measurement concept is the fact that every transaction is measured using monetary measures.

Question 7

What is Business Entity?

Answer 7

The principle that transactions associated with a business must be separately recorded from those of its owners or other businesses.