Accounting Concepts

Question 1

Accounting Entity concept or Business Entity concept

Answer 1

Drawings must be recorded in the books of a business because the owner and the business are considered to be two separate entities.

Question 2

The Going Concern Concept

Answer 2

-It assumes that the business will continue to operate
indefinitely
-It is with this concept that all assets are shown at their original price.

Question 3

The Monetary Concept

Answer 3

-It regards money as a unit of measurement.
-Only transactions that can be measured in monetary
terms should be included in the accounting records.

Question 4

The Historical Cost Concept

Answer 4

-Records transactions at original or actual price.

Question 5

The Objectivity Concept

Answer 5

-Aims to achieve objectivity by recording transaction base which are supported by documentary evidence.

Question 6

The Accounting Period Concept

Answer 6

It divides the life of the business into fix periods to make it possible for the preparation of periodic financial reports.