Key words in case study Flashcards
What is the going concern concept?
It means that, when producing accounts, there is an assumption that the business will continue to operate for the foreseeable future unless there is evidence to suggest that it will not
What is the historical cost concept? Give one main advantage
the historical cost of an asset refers to its purchase price or its original monetary value.
Advantage is that historic cost is a known amount that is indisputable
How does the historical cost concept apply to Trail-Seekers Ltd’s accounts?
All assets, except freehold land and buildings, are recorded at their original purchase cost, not current market value.
What does the capital reserve represent in TS’s accounts?
It represents the unrealised surplus from revaluation of freehold land and buildings.
What is the accruals concept as demonstrated by the travel expenses?
Expenses are recognised in the period to which they relate, regardless of when cash is paid or received.
Why does net assets always equal shareholder funds?
Net assets are calculated as total assets minus liabilities. This value reflects the equity value available to shareholders, which is also represented by shareholder funds.
