Finance-accounting Principles

Question 1

Money measurement principle

Answer 1

Helps to measure business wealth and performance

Focus mainly on accounting transactions hence more quantitative as converting quantitative data to money

Question 2

Double entrei principle

Answer 2

This is where every transaction as two effects. On buyers and sellers side.

E.g someone purchases a drink from the supermarket, pays cash to keeper and gets drink

Here- seller cash increases but stock decreases.
Buyer cash decreases and get what he wants

Question 3

Accruals

Answer 3

Recognizes when revenues and expenses have been received and cash amounts that have not been payed or received.

Checks of payments have been done and revenue received within a period of time

E.g January to December

Question 4

Conservatism

Answer 4

Recognize expenses and liabilities whenever there is a sense of uncertainty about outcome. And only recognizes revenue once it has been received

Accountants here must be realistic otherwise they can be accused of fraud

Question 5

Realization concept

Answer 5

Revenue can only be recognized once underlying goods and services associated with revenue have been delivered

E.h hire purchase