Topic 1:Introduction to Accounting

The accounting period of a business is separated into activitiess that help the business keep its accounting records in an orderly fashion.

• Accounting period

• Source Document

Concept: a business's records should never be mixed with an owner's personal records and reports

• matching concepts

• business entity

Concept: When a source document is prepared for each transaction for evidence

• objectivity

• materiality

Concept: When a business activity is large enough to impact business decisions, it should be recorded clearly in the financial statements

• historical cost

• materiality

Concept: Financial statements are prepared with the expectation that business will continues its operation in future

• going concern

• materiality

Concept: The same accounting procedures must be followed in the same way each accounting period

• periodicity

• consistency

Concept: The revenue from business activities and the expenses associated with earning that revenue are recorded in the same accounting period

• unit of measurement

• matching expenses with revenue

Concept: Business transactions are reported in numbers that have common values. Meaning all reporting should be done in terms of money

• Unit of measurement

• historical cost

Preparing Financial Statements states that the accounting records should be based on the original cost of the transaction.

• conservatism

• Historical Cost

The historical cost principle requires that when assets are acquired, they be recorded at

• market price

• cost price