Concepts

Question 1

Monetary Measurement Concept

Answer 1

All transactions, assets, liabilities, incomes, expenses and equity are recorded and reported in New Zealand $$

Question 2

Accounting Entity Concept

Answer 2

The financial affairs of the owner must be separate and distinct from the affairs of the business. Only the business incomes and expenses are reported in the income statement. Only its assets and liabilities are in the statement of financial position.

Question 3

Historical Cost Concept

Answer 3

All transactions are recorded at their value at the time of transaction. Assets are recorded at the purchase price in the statement of final position. Equally a loan is reported at that amount borrow not the amount that will be paid back (which includes interest)

Question 4

Going Concern Concept

Answer 4

The business is expected to continue of operate into the foreseeable future. This is why assets and liabilities are classified as current or non current as we intend to continue operating for more than a year.

Question 5

Period Reporting Concept

Answer 5

The life of a business is broken up into equal periods of time (normally a year) to allow comparisons. Remember the accounting period normally ends on the 31st of March.

Question 6

Accural Basis Concept

Answer 6

All transactions are recognised when the occur. They are recorded and reported when the occur regardless of when the cast is paid or received. This is why we have balance day adjustments.