GAAP principles [P1] Flashcards
1
Q
What does GAAP stand for
A
Generally accepted accounting principles
2
Q
Matching concept
A
To calculate profit, income is matched against relevant expenses incurred
3
Q
Going-concern cost concept
A
Financial statements are prepared on the assumption that the business will continue operating for the foreseeable future
4
Q
Historical cost concept
A
Assets are always reflected at original cost price
5
Q
Business entity concept
A
Financial affairs of a business and owner are kept separate
6
Q
Prudence concept
A
Conservative in the estimation of profit
7
Q
Concept of materiality
A
Financial statements should be simple, but important items should be highlighted and disclosed separately
8
Q
Double entry principle
A
For every debit, there’s a corresponding credit
