Accounting Concepts

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  • Created by: Hannah
  • Created on: 01-05-13 21:53
Going Concern
Assuming a business will continue to operate for the foreseeable future unless otherwise. Going concern allows assets to stretch their lives into the financial statements ie charging depreciation.
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Accruals (Matching)
The expense should match the revenue which relates. Revenue and expenses should be recognised in the same accounting period.
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Consistency
Consistency requires that the chosen method should always be applied to all items of the same type in the same accounting period and future periods. Consistency helps compare which is a desirable characterisitic for accounting information.
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Prudence
When making an estimate an accountant will tend to: underestimate revenue and overstate expenses to not give an favourable view.
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Materiality
Materiality is important as it relates to the siginifcance of the transaction, dicussing whether is it material or immaterial.
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Realisation
Transactions should only be recognised in the P&L a/c when the obligation to pay has been accepted or the goods/services have been passed to customer.
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Business Entity
The business accounts should be treated separately from the owner's accounts.
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Objectivity
Financial accounts should be produced as factually accurate as possible; should be based on facts rather than opinions and bias.
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Historic Cost
Based on using the orginal cost of the item instead of it's current value.
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Other cards in this set

Card 2

Front

The expense should match the revenue which relates. Revenue and expenses should be recognised in the same accounting period.

Back

Accruals (Matching)

Card 3

Front

Consistency requires that the chosen method should always be applied to all items of the same type in the same accounting period and future periods. Consistency helps compare which is a desirable characterisitic for accounting information.

Back

Preview of the back of card 3

Card 4

Front

When making an estimate an accountant will tend to: underestimate revenue and overstate expenses to not give an favourable view.

Back

Preview of the back of card 4

Card 5

Front

Materiality is important as it relates to the siginifcance of the transaction, dicussing whether is it material or immaterial.

Back

Preview of the back of card 5
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