When to use which Accounting Theories Flashcards

1
Q

Acounting Entity Theory

A

When recording capital and drawings

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2
Q

Going Concern Theory

A

For continuity of business operations

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3
Q

Monetary theory

A

Only items that can be expressed in monetary terms are recorded

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4
Q

Accounting period theory

A

Accounting period must be fixed at regular intervals for meaningful comparison of accounting information

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5
Q

Accrual basis of accounting theory

A

For recording expense payable, prepaid expense, income receivable, and income received in advance.

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6
Q

Objectivity theory

A

When discussing the need for source documents

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7
Q

Historical Cost Theory

A

The need to records assets at original purchase price

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8
Q

Consistency Theory

A

The need to have same method for meaningful comparison. Typically used for depreciation method.

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9
Q

Materiality Theory

A

For distinguishing capital and revenue expenditure

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10
Q

Prudence Theory

A

For all estimations to be made
- Depn
- AFI
- Lower of cost or NRV for inv

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11
Q

Revenue Recognition Theory

A

for incomes to be recognised

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12
Q

Matching theory

A

For all expenses to be incurred

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