Conservatism (Prudence): States that accountants should provide for and record losses as soon as they are anticipated. Profits, on the other hand, should not be recorded until they are realised.
- Arises when accountants are required to make any estimates when drawing up accounts.
Realisation: States that all revenues and profits should be recorded in the accounts 'when the legal title to the goods is transferred. This means that customers are legally bound to pay for goods they have bought.
Double Entry Principle: States that all business transaction have a dual aspect and both sides should be recorded if the accounts are to be balanced. They should be recorded in a debit and credit entry.
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