Accounting Unit 2 2.5 / 5 based on 2 ratings ? AccountingASAQA Created by: Rachael JenkinsCreated on: 20-05-13 17:38 Concept - Cost Assets should be recorded at their cost to the business and not their replacement future cost. 1 of 17 Concept - Going Concern This assumes the business will continue to trade normally for the forseeable future unless the accountant says otherwise. 2 of 17 Concept - Matching Accounts are drawn up on a matching basis and not a cash basis. 3 of 17 Concept - Consistency Financial statements should be prepared using the same accounting policies to ensure they are fair and comparable. 4 of 17 Concept - Prudence The accountant should provided for losses as soon as they are known and recognise profits only when proven. 5 of 17 Concept - Materiality Normal treatment for an accounting transaction can be ignored if the amount is insignificant. 6 of 17 Concept - Realisation Revenue is considered to have been earned on the date when it is realised. 7 of 17 Concept - Business Entity The business is a separate entity in its own right and is therefore distinct from the owner 8 of 17 Objectivity The financial statements should be prepared in a format that is universally acceptable and understandable for all users. 9 of 17 Capital expenditure Is expenditure on resources for which the benefit to the business will last for more than one year. 10 of 17 Revenue expenditure Is expenditure on resources for which the benefit to the business will be less than one year such as purchases. 11 of 17 Capital receipts Is revenue generated from finanacing and investing activities such as the issuing of shares. 12 of 17 Revenue receipts Is revenue generated from operating activites such as selling goods/services. 13 of 17 Accrued income Income owed to the business by a debtor that has not been recieved in the current year but will be paid in the following year. 14 of 17 Prepaid income Income that has been recieved from the debtor in the current year for goods/services that will be supplied in the next finacial year 15 of 17 Depreciation The loss in value of a non current asset over time because it has a finite life: USE, OBSOLENCE, REDUNDANCY 16 of 17 Straight line method (cost - scrap value) / life of asset 17 of 17
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