6 Accounting Principles/Conventions

Question 1

Name 6 Accounting Conventions

Answer 1

Accounting Entity
Accounting Period
monetary
Materiality
Going Concern
Historical Cost

Question 2

What is Accounting Entity

Answer 2

Accounting Entity Convention regards business as having sperate existence from owners. Means business transactions are seperate from private transactions of the owner

Question 3

What is Monetary

Answer 3

States item must be assigned a monetary value, Must be displayed in $AUd

Question 4

What’s historical cost

Answer 4

Assumes business transactions are recorded in terms of cost at the time transaction occurred. Means all transactions recorded at OG monetary value of item.

Question 5

Materailtiy

Answer 5

Refers to the importance of item to particularly entity. Info is material, if misstatement happens it could influence investment decisions.

Question 6

What is Accounting Period

Answer 6

Company can choose when to report business . Business can choose the frequency but it cannot be longer than a year and once frequency chosen it must remain

Question 7

What is going concern?

Answer 7

Assumes the business will be operating for foreseeable future so its record should keep it on that basis. For e.g. assets are shown at Og cost.
Going Concern is not followed if evidence business will close in future. In this situation assets should be shown at liquidation value(current sale value)