Concepts 1.1

Question 1

Accounting entity

Answer 1

The financial affairs of the entity are kept separate and distinct from the financial affairs of the owner

Question 2

Period Reporting

Answer 2

The lifetime of the business is divided into nominated time periods of equal length, usually a year.

Question 3

Going Concern

Answer 3

The financial reports are prepared on the assumption that the life of the business is expected to continue to operate into the foreseeable future.

Question 4

Historical cost

Answer 4

Transactions are recorded at the amount of cash paid or payable at the time of the transaction

Question 5

Accrual basis

Answer 5

Transactions are recognised when they occur and are recorded and reported in the financial reports of the period to which they relate

Question 6

Monetary measurements

Answer 6

Financial transactions must be measured in a common currency such as NZ$ for New Zealand businesses