This is the concept where wherever possible the accounting information should be factual (objective) rather than someones opinion (subjective). This is because facts can be agreed on rather than onpinions as they vary on the person and can be disputed.
This is the concept where assets should be valued at the price they were purchased at. This is their original cost. This is because this is an objective valuation rather than an opinion.
This concept is where those who are preparing the financial accounts should always assume that the business is to continue trade for the forseeable future, atleast one financial year into the future. This is to assume that they will not need to resell there assets of the business as the resale value would be different to the original cost of them. This concept would be ignored if they knew they would close the business within the next financial year.
This is the concept that when calculating profits for a period of time you only use expences that are matched to that year. It is a fundemental rule on how to calculate profit, this means with expences and revenue whether money has been received or paid only the amount for that financial year will be on the profit and loss account.
This concept requires the business to use the same accounting procedures and policies from one financial year till the next. This ensures that financial statements are produced the same way each year. A result of this is that when comparing the financial statements between years it is more acurate for forcasting for the future. An example of this would be keeping to the same depreciatio method.
In this concept, when there is a doubt about values of assets or profit they are to be understated rather than overstated. This ensures that people who have stakes in the business are not missled by the businesses financial statements. An example could be the valuation of the expected value of an asset after its life.
This concept is that only items of significant value should be added onto thefinancial items individually. The trivial items are grouped together.
This concept that sales should only be included into the financial when they are certain to receive it. A sale is certain either if money has been received or an invoice has been issued.
This concept means that only the transactions of the business itself are recorded. The owners private affairs do not get included into the financial information.