Accounting Principles Flashcards
What is the acronym for the Accounting Principles?
CHER @ MCG
What does CHER @ MCG stand for?
Conservatism, Historical Cost, Entity, Reporting Period, Monetary Unit, Consistency, Going Concern
What does the Conservatism Principle state?
Losses should be recorded when probable and gains only when certain to ensure that liabilities and expenses are not understated and that assets and revenue is not overstated.
What does the Historical Cost Principle state?
Transactions should be recorded at their original purchase price, as this value is verified by a source document.
What does the Entity Principle state?
From an accounting perspective, the business is separate from the owner and other entities and its records should be kept on this basis.
What does the Reporting Period Principal state?
The life of the business should be divided into periods of time to allow reports to prepared, and accounting records should reflect the period of time which a transaction occurs.
What does the Monetary Unit Principal state?
All items must be recorded and reported in monetary terms; that is, in the currency of the country of location in which the reports are being prepared and ultimately used.
What does the Consistency Principle state?
Accounting methods used by the business should be kept the same from one period to the next.
What does the Going Concern Principle state?
Assumes that the life of the business is continuous and its records are kept on that basis.
