Accounting principles Flashcards
What is accounting entity?
An accounting entity is a separate organization or unit that maintains distinct financial records, separate from its owners or other organizations. This ensures the financial activities of the entity are clearly tracked and reported independently. Examples include corporations, partnerships, and sole proprietorships, where the entity’s financial transactions are separate from the personal finances of its owners or stakeholders.
What is the monetary principle?
The monetary principle states that all financial transactions should be recorded in terms of a common monetary unit, such as dollars or euros. This ensures consistency and comparability in financial reporting, allowing businesses to track their financial activities clearly and uniformly.
what is a historical cost?
Historical cost refers to the original purchase price of an asset, including any additional costs necessary to acquire and prepare the asset for use. It is recorded at the time of acquisition and does not change with market fluctuations, providing a stable and objective basis for accounting.
what is materiality?
Materiality in accounting refers to the significance of an item or transaction in financial reporting. An item is considered “material” if its inclusion or omission would influence the decisions of users of financial statements. Essentially, it helps determine which information is relevant enough to be disclosed or reported.
what is accounting period?
An accounting period is a specific time frame, typically a month, quarter, or year, during which a company measures and reports its financial performance. This period helps in preparing financial statements, ensuring consistency and comparability of financial data over time.
What is going concern?
Going concern is an accounting principle that assumes a business will continue operating for the foreseeable future, unless there’s evidence to the contrary. It means the company will not be forced to liquidate or significantly reduce operations, allowing financial statements to be prepared based on this assumption.
what is collateral?
security offered by the business- this is business fails that the bank can take possesion of the security to repay the loan
Land and buildings are the most common form of collateral
quality of a business plan, collateral available, the capacity fo the business to pay
what is liquidity?
A firms viability (its capacity to remain in existence) will depend in part on its ability to pay its debts as they fall due, and this in turn will depend in part on its ability to generate cash ( liquidity).
what is risk factor history?
what is a guarantors?
what is an interest rate?
What is a future business?
what is a performance regarding performance in a financial statement?
What is financial position?
A summary balance of the general ledger assets, liabilities and equity is represented in a report called the balance sheet.
What is liquidity?
what is the Business names registration act of 2011 (cth)
What is the partnership act of 1895 ( WA)
what is a balance sheet?
