Accounting Principles Flashcards
Accounting entity assumption
Business entity convention (UK)
- The most basic concept in accounting
- Each entity is an economic unit and ise kept separate from other entities (IF it mentions entity, it is this concept)
Going-concern assumption/ Continuity assumption
Going concern convention (UK)
-Assumes that the business will remain in operation for and indefinite period
Historical cost principle (Acquisition cost principle)
Historical cost convention (UK)
-states that acquired assets and services should be recorded at actual cost
Stable-monetary-unit concept
If it mentions UNIT, then it is this.
- Accounting info is expressed primarily in monetary terms.
- Ignores the effect of inflation in accounting records to make records more reliable.
Reliability principle/ Objectivity principle
States that the accounting records should be based on the most reliable and verifiable data
Time-period concept/Periodicity assumption
Requires that the accounting information is reported at regular intervals
Revenue principle
Realization principle (US) Realisation convention (UK) Revenue is recorded when earned
Matching principle
Matching convention (UK) -Expenses should be deducted from the revenues earned in the same period
Conservatism concept
Prudence convention (UK)
- Not giving misleading information.
- No overstating assets, owner’s equity and revenues
- No understating liabilities and expenses
Materiality concept
Threshold of recognition (UK)
-Strictly proper accounting only for items and transactions that are significant
Consistency principle
Requires businesses to have the same accounting methods from period to period
Disclosure principle
If disclosure, then that is that
-Requires businesses to report enough information for the outsiders to make knowledgeable decisions.
