concepts

Question 1

business entity

Answer 1

final accounts record and report on the activity of one particular business only (no owners personal affairs) (only capital and drawings)

Question 2

money measurement

Answer 2

the accounting system uses money as the common denominator to record all business transactions (value)

Question 3

materiality

Answer 3

some items in accounts are of such low value they are not worth recording seperately (relatively insignificant)

Question 4

going concern

Answer 4

presumes the business will continue in trade for the foreseeable future (income statement and balance sheet is prepared)

Question 5

accruals / matching

Answer 5

expenses and revenue must be matched to the same time period (whether or not money has been received or paid)

Question 6

prudence

Answer 6

final accounts should always report a conservative (lower) figure for profits and assets, anticipate (recognise) no profit but anticipate all losses

Question 7

consistency

Answer 7

when a business adopts a particular accounting method, it should continue to use it consistently and apply it in the same way each accounting period

Question 8

realisation

Answer 8

transactions are recorded in the final accounts when legal title passes (ownership in law) between buyer and seller

Question 9

cost

Answer 9

assets and liabilities are recorded in the accounts at cost (historical)

Question 10

duality

Answer 10

every financial transaction is recorded by two opposite entries (debit and credit), double entry bookkeeping