Concepts Flashcards
What is the money measurement concept?
Transactions recorded in terms of money
What is the duality concept?
Transactions recorded with two opposite entries, a debit and credit, of equal values
What is the cost concept?
Assets and liabilities valued at cost rather than estimating what they’re worth now
What is the going concern concept?
The assumption that the business is going to trade in the foreseeable future
What is the accruals concept?
Incomes and expenses are matched (with adjustments) for a time period when calculating profit. E.g. prepayments, accruals, depreciation
What is the consistency concept?
One accounting policy should be chosen and the business must stick to this same policy every financial year e.g. depreciation method
What is the prudence concept?
When in doubt asset and profit values should be understated rather rather overstated. Provide for expenses and losses as soon as they are anticipated but don’t recognise income or profits until they are realised. Means not misled into thinking business is doing better than it is
What is the materiality concept?
If the amount is relatively insignificant/small then the usual accounting treatment of an item can be ignored e.g. treating a stapler as an expense not an asset
What is the realisation concept?
Sales revenue and purchases are recorded in accounts at the date goods/services are provided and not when payment is made for them.
What is the business entity concept?
Financial statements must only include transactions relating to the business and not the people who own or run it.
