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Accounting Concepts
Rules or guidelines that accountants follow when drawing up accounts. |
Last ones
Business Entity |
Money Measurement |
Dual Aspect |
Financial affairs of the business should be completely separate from those of the owner |
Financial Records should be expressed in monetary terms. |
Every transaction has 2 effects on the business's accounts. |
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Statements of Standard Accounting Practice
Going Concern Concept |
Consistency Concept |
Prudence Concept |
Accruals or Matching Concept |
Assumes that a business will carry on tradinf for the foreseeable future. |
States that the accounts of a business should be prepared on the same basis every year. |
States that accountants should be cautious when reporting the financial position of a business. revenue and profit should not be recorded unless it is certain; anticipate all possible losses and record them as soon as they are known; choose the lowest value when faced with a choice of asset values or revenue; highest value when referring to costs |
Accruals: revenue whould be recorded when it is earned and not hen the money is received. (same goes to costs). Matching: states that when calculating profit, revenue should be matched against expenditure incurred in earning it. |
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Other
Objectivity |
Historical Cost |
Realization |
Materiality |
Accounts should be based on verifiable evidence rather than personal opinion |
Accounting should be based on the original costs incurred in the transaction |
Revenue shouldn't be recognized until the exchange of goods or services has taken place. |
Accountants should avoid wasting time trying to accurately record items of expenditure which are trivial. |
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