Concepts And Principles

Question 1

Monetary Principle

Answer 1

Item included in accounting records must be able to be expressed in monetary terms

Question 2

Accounting Entity Concept

Answer 2

Every entity can be separately identified and accounted for

Owner’s transactions are seperate from entity’s transactions

Question 3

Accounting Period Concept

Answer 3

The life of a business can be divided into artificial periods
Useful reports covering those periods can be prepared for the entity

Question 4

Going Concern Principle

Answer 4

Business will remain in operation for the foreseeable future

Question 5

Cost Principle

Answer 5

All assets are initially recorded in the accounts at their purchase price or cost (historical price)
To provide useful information, sometimes entities need to deviate from cost Principle –> eg. Revaluation of non-current assets

Question 6

Full Disclosure

Answer 6

All circumstances and events that could make a difference to decision-making should be disclosed in the financial statements