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Top 10 Accounting Concepts Explained
- 2. 1. Entity 2. Money measurement 6. Accruals 4. Cost 3. Going-concern 5. Realisation 7. Matching 8. Periodicity 9. Consistency 10. Conservatisme
- 3. • Accounting concepts 1. Separate Entity 2. Money measurement 6. Accruals 4. Cost 3. Going-concern 5. Realization 7. Matching 8. Periodicity 9. Consistency 10. Conservatism The affairs of the business are distinct from the personal affairs of its owner. The business is an independent ENTITY.
- 4. • Accounting concepts 1. Entity 2. Money measurement 6. Accruals 4. Cost 3. Going-concern 5. Realization 7. Matching 8. Periodicity 9. Consistency 10. Conservatism Records are kept in monetary terms, and only matters capable of being expressed in monetary terms are reflected in the books.
- 5. • Accounting concepts 1. Entity 2. money measurement 6. Accruals 4. Cost 3. Going-concern 5. realization 7. Matching 8. Periodicity 9. Consistency 10. conservatism The business is assumed to have a continuing and indefinite life. The business IS NOT on the verge of extinction.
- 6. • Accounting concepts 1. Entity 2. money measurement 6. Accruals 4. Cost 3. Going-concern 5. realization 7. Matching 8. Periodicity 9. Consistency 10. conservatism Accountants compute the value of an asset by reference to its acquisition cost, AND NOT by reference to its expected future benefits.
- 7. • Accounting concepts 1. Entity 2. Money measurement 6. Accruals 4. Cost 3. Going-concern 5. Realisation 7. Matching 8. Periodicity 9. Consistency 10. Conservatism Any change in the value of an asset may only be recognized at the moment the firm REALIZES it, or disposes of that asset.
- 8. • Accounting concepts 1. Entity 2. money measurement 6. Accruals 4. Cost 3. Going-concern 5. realization 7. Matching 8. Periodicity 9. Consistency 10. conservatism The recognition of an expense (or revenue) and the related liability (or asset) results from an accounting EVENT, and is not necessarily signaled by a cash transaction. SFAC #1: Accrual accounting attempts to record the financial effects on an enterprise of transactions and other events and circumstances that have cash consequences for the enterprise in the periods in which these transactions, etc… occur rather than only in the periods when cash is received or paid.
- 9. • Accounting concepts 1. Entity 2. money measurement 6. Accruals 4. Cost 3. Going-concern 5. realization 7. Matching 8. Periodicity 9. Consistency 10. conservatism Expenses should be recognized in the same accounting period during which the firm has recognized the associated revenues. Revenues and expenses resulting from the same transactions (or events, circumstances, etc…) should be recognized simultaneously.
- 10. • Accounting concepts 1. Entity 2. money measurement 6. Accruals 4. Cost 3. Going-concern 5. realization 7. Matching 8. Periodicity 9. Consistency 10. conservatism Accounting reports must be prepared for fixed, and relatively short, periods of time.
- 11. • Accounting concepts 1. Entity 2. money measurement 6. Accruals 4. Cost 3. Going-concern 5. realization 7. Matching 8. Periodicity 9. Consistency 10. conservatism Like transactions should be treated the same way in consecutive periods.
- 12. • Accounting concepts 1.Separate Entity 2. Money measurement 6. Accrual 4. Cost 3. Going-concern 5. Realisation 7. Matching 8. Periodicity 9. Consistency 10. Conservatism (1) The accountant should not anticipate profit, and should provide for all possible losses; (2) Faced with several methods of valuing an asset, the accountant should choose that which leads to the lesser value. Contact: asand343@gmail.com