Accounting Principles

Question 1

What are accounting principles

Answer 1

The idea that accounts should be constructed in the lines of 7 principles.

Question 2

What are the 7 principles

Answer 2

Consistency 
Objectivity 
Prudence
Matching 
Materiality
Going concern
Realisation

Question 3

Consistency

Answer 3

The idea that accounts should be illustrated in the same format and recorded in the same way. This makes them more comparable

Question 4

Materiality

Answer 4

That they should only include relevant things when producing accounts such as assets and cash flow E.G Oil refinery tanks should be included, paper cups for the water fountain shouldn’t.

Question 5

Objectivity

Answer 5

That all accounts should not be biased and should be realistic.

Question 6

Going concern

Answer 6

The business should be mindful of the state that they are in, if the business is going into liquidation then the accounts will look different.

Question 7

Matching (Accruals)

Answer 7

The business should record its transactions as they take place and not when payment is received, gives better illustration of cash flow.

Question 8

Prudance

Answer 8

Do not overstate or exaggerate financial positions or things to expect.

Question 9

Realisation

Answer 9

Similar to matching however it is when legal ownership changes hands, not when the payment is made.