Accounting Concepts
- Created by: Connor Parsons - Team GR
- Created on: 25-01-14 15:26
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- Accounting Concepts
- Business Entity
- The final accounts report on the activities of the business and not the people running or owning the business
- Materiality
- Items with low monetary value that is not worthwhile recording separately e.g. small expenses, low cost non-current assets
- Cost
- Valuations in the balance sheet can not be disputed but as they become historic, they may need to be revaluated
- Going Concern
- This presumes that the business will continue to trade for the foreseeable future, without the need to go into liquidisation
- Prudence
- Taking a pessimistic view, when in any doubt, reporting a lower figure for profits and assets and a higher figure for liabilities
- Accruals
- Expenses or incomes that are not paid or received in the same financial period, but are in another
- Consistency
- When a business adopts an accounting policy, it should keep the same policy for more than one financial period, but it can be changed with good reason, e.g. valuation of inventory
- Realisation
- Business transactions are recorded in the final accounts when legal ownership changes and not necessarily when it is paid for
- Objectivity
- The accounts should not be influenced by opinions of the owner or the account
- Business Entity
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