The document discusses key accounting concepts: 1) The accounting period concept covers the time period financial statements measure income and the relationship between balance sheets and income statements. 2) The accrual concept supports measuring income when efforts occur rather than when cash is received or paid. 3) The realization concept determines when revenue and expenses can be measured based on an exchange taking place and amounts being reasonably assured of collection.

1. Accounting Concepts
Accounting Period Concept: Covers the period for which the income has been measured. It is the
time between the preparation and presentation of two successive statements of financial position by
an organization. The income statement presents the changes in owners’ equity due to operations
and other events between one balance sheet and the next.
Accrual Concept: Supports the idea that income should be measured at the time major efforts or
accomplishments occur rather than when cash is received or paid.
Realization Concept: Determines whether a revenue or expense has occurred so that it can be
measured, recorded and reported in the financial reports. In general, revenue is recognized along
with the associated expenses when an exchange has taken place, the earnings process is complete,
the amount of income is determinable, and collection of amounts due is reasonably assured.
Matching Concept: Determines that the expenses associated with revenue are identified and
measured.
Money Measurement Concept: All data is expressed in a common monetary unit that can be
added, subtracted, multiplied and divided to produce financial statements and reports, which can
then be analyzed.
Business Entity Concept: Delineates the boundaries of the organization for which amounts are
kept and reports are made.
Going Concern Concept: It is assumed that an entity will continue to operate much as it has been
operating for an indefinitely long period of time.
Cost Concept: Assets are initially recorded by measuring the amount paid for them. As time
passes, asset measurements are not changed even if the current value of these assets is changing.
Conservation Concept: Revenues and gains are recognized slower and expenses and losses are
recognized quicker.
Consistency Concept: Once an entity has selected an accounting method for a kind of event or a
particular asset, that same method should be used for all future events of the same type and for that
asset. Comparability is enhanced from one period to the next.
Materiality Concept: Insignificant events need not be measured and recorded. Events judged to
be insignificant can be ignored or disregarded.

2. The Accounting Equation and
Framework

3. The Accounting Equation and
Framework