1.7 Basic of Accounting Concepts

All accounting records are prepared based on the cost value or the actual price stated in the source document.

• Going Concern Concept

• Hostorical Cost Concept

• Accrual Concept

• Conservatism Concept

Businesses must practice and adhere to rules, assumptions or principles consistently. They cannot change their practices without concreate reasons.

• Matching Concept

• Hostorical Cost Concept

• Consistency Concept

• Conservatism Concept

Businesses must avoid overstating values of assets and revenue, and understating liabilities and expenses when recording transactions.

• Matching Concept

• Hostorical Cost Concept

• Consistency Concept

• Conservatism Concept

. The revenues earned in an accounting period must be matched against the expenses incurred in order to generate revenues in the same period.

• Matching Concept

• Hostorical Cost Concept

• Consistency Concept

• Conservatism Concept

Revenues are recognized and recorded when goods and services are sold or provided regardless of whether cash has been received or not. Expenses will be recorded when the goods and services were used in accounting period regardless of whether it has been paid for or not.

• Accrual Concept

• Hostorical Cost Concept

• Consistency Concept

• Conservatism Concept

Only the data from transactions which affect and influence decision making is considered making and should be accounted for

• Materiality Concept

• Business Entity Concept

• Going Concern Concept

• Objectivity Concept

Business and its owner are two separate entities. The business’s transactions must be accounted separately from the owner’s transactions

• Materiality Concept

• Business Entity Concept

• Going Concern Concept

• Objectivity Concept

Accounts are prepared with the assumption that the business or organization will continue to operate for a foreseeable future.

• Materiality Concept

• Business Entity Concept

• Going Concern Concept

• Objectivity Concept

Accounting records and statements are based on the most reliable data available so that they will be as accurate and as useful possible.

• Materiality Concept

• Business Entity Concept

• Going Concern Concept

• Objectivity Concept

Financial data must be recorded and presented in a financial configuration that is in monetary value, such as Ringgit in Malaysia and Yen in Japan

• Materiality Concept

• Money Measurement Concept

• Going Concern Concept

• Objectivity Concept