Accounting Concepts

Question 1

Cost as an account concept

Answer 1

All assets and expenses are recorded at cost or net realisable value.

Question 2

Dual affect

Answer 2

Every debit entry has a credit entry and vice versa

Question 3

Going concern

Answer 3

Account prepared under the assumption the business will continue.
Meaning the assets are valued at the cost less their accumulated deprecation.

Question 4

Accurals

Answer 4

Income and expenses recorded in the financial year they occur not when the money is received.

Question 5

Realisation

Answer 5

Profit is recognised when the ownership of goods is transferred to the customer and not when money changes hands.

Question 6

Consistency as an accountancy concept

Answer 6

When a method of accounting is established the same method should be used the following year.
This is so the financial statement is comparable from one year to the next.

Question 7

Materiality

Answer 7

Item is not in financial statement if it’s not high value

Question 8

Objectivity

Answer 8

Accountants should be objective when completing accounts for the business and not allow their own bias effect their work.