accounting concepts

Question 1

Matching (acrual ) concept

Answer 1

All income to be accounted for when they are earned and expenditures are recognized when they r incurred. Expenses should be matched against the income of the relevant period.

Example: An electricity bill for March, even if paid in April, is recorded as an expense in March.

Question 2

Consistency concepts

Answer 2

Accounting methods once adopted must be followed consistently in order to have fair and valid comparisons. Business should refrain from changing accounting policy unless on reasonable grounds

Question 2

Going concern

Answer 2

A business is assumed to be operating in the forseeable future without the need for liquidation.
Assets r recorded at historic cost not liquidation cost

Question 3

Prudence concept

Answer 3

Should not overstate assets/income and understate liabilies/expenses.
(Shouldnt over state profits)

Question 4

Business entity concept

Answer 4

Business is treated as separate from owner. Personal transactions of owners shouldnt be recorded in business accounts

Question 5

Materiality concept

Answer 5

only info that would influence users decisions should be recorded in the financilal statements. Do not include insignificant amounts i.e paper

Question 6

Money measurement concept

Answer 6

Only items that can be measured in monetary terms should be recorded

Question 7

Realisation Concept

Answer 7

Revenue can only be recognized after it has been earned.

Question 8

Historical Cost Concept

Answer 8

Assets and liabilities are recorded at their original purchase cost.

Question 9

Duality Concept

Answer 9

Every transaction has two equal and opposite effects on the accounting equation.
✅ Foundation of double-entry bookkeeping: Debit = Credit.

Question 10

Objectivity Concept

Answer 10

Accounting information should be based on verifiable and reliable evidence, not personal opinions.