Accounting Concepts

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  • Created by: Natalie
  • Created on: 08-12-20 16:20

1. Duality

  • Only transactions that can be expressed in terms of money are recorded.
  • Assets and liabilities are recorded in the financial statements at historical cost.
  • Each financial transaction is recorded by two equal in value and opposite accounting entries.
  • When a business adopts a particular accounting policy, this is used every time unless there is a good reason to change it.
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2. Business entity

  • Each financial transaction is recorded by two equal in value and opposite accounting entries.
  • Personal assets/liabilities are kept separate from those of the business.
  • Items that are of very low monetary value are not recorded separately.
  • Where there is doubt, a conservative (lower) figure for profit/assets should be reported.

3. Going concern

  • Assets and liabilities are recorded in the financial statements at historical cost.
  • Presumes that the business will continue to trade in the forseeable future.
  • Personal assets/liabilities are kept separate from those of the business.
  • Revenue for goods can only be recorded when the legal title passes between buyer and seller.

4. Cost

  • When a business adopts a particular accounting policy, this is used every time unless there is a good reason to change it.
  • Assets and liabilities are recorded in the financial statements at historical cost.
  • Expenses/incomes for goods and services are matched to the same period.
  • Presumes that the business will continue to trade in the forseeable future.

5. Asset valuation

  • Cost
  • Realisation
  • Business entity
  • Accruals

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