Concepts

Question 1

Monetary Measurement Concept

Answer 1

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

Question 2

Accrural Basis Concept

Answer 2

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

Question 3

Going Concern Concept

Answer 3

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

Question 4

Accounting Entity Concept

Answer 4

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

Question 5

Historical Cost Concept

Answer 5

All transactions are recorded at their value at the time of the transaction. Assets are recorded at the purchase price in the statement of financial position. Equally a loan is reported at the amount borrowed not the amount they will pay back (which includes intrest)

Question 6

Period Reporting Concept

Answer 6

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