accounting rules Flashcards
Why are accounting rules necessary
-to ensure that the accounting statements can be understood by interested parties
-to allow comparison between the financial results or more businesses
What is business entity principle
The business entity principle means that the business is treated as being completely separate from the owner of the business
What is the matching principal?
The matching principle means that the revenue of the accounting period is matched against the cost of the same period
What is the materiality principle
The materiality principle means that the individual items which will not significantly affect either the profit or assets of a business do not need to be recorded separately.
What is the consistency principle
The consistency principle means that their accounting methods must be used, consistently from one accounting period to the next
What is the principal of duality
The principle of duality means that every transaction is recorded twice once on the debit side and once on the credit side
What is the going concern principle
The going concern principle means that accounting records are maintained on the basis that the business will continue to operate for an indefinite period of time
What is the historic cost principal
The history course principal means that all asset and expenses are initially recorded at the actual cost
What is money measurement principle
Only information which can be expressed in terms of money can be recorded in the accounting records
What is the prudence principle
That profits and assets should not be overstated and losses and liabilities should not be understated
What is the realisation principle
Revenue is only regarded as being earned when the legal title to goods passes from the seller to buyer
How can the quality of information contained in financial statements be measured
-comparability
-relevance
-reliability
-understandability
What is capital expenditure
Money spent on purchasing,improving or extending non-current assets
What is revenue expenditure
Money spent on running a business on a day to day basis
What is a capital receipt
Money received by a business from a source other than the normal trading activities
