Accounting

What is accounting concepts?

• recognises that there are two aspects to each financial transactions, represented by debit and credit in accounts

• helps accountants apply the same concepts and methods and ensure that the financial statements produced are accurate and can be meaningfully compared

• basic rules for recording financial transactions and preparing financial statements. They are sometimes known as principles

• every business is regarded as having an existence separate from that of its owner

The business makes a profit of $6000.

Debit: Statement of profit or loss $6000

Credit: Capital $6000

The profit belongs to owner and increases what the business owes to him.

Which accounting concepts is being applied?

• Duality

• Business entity

• Historic cost

• Money measurement

Financial transactions are recorded at their original cost to the business. Which accounting principle is being applied?

• Historic cost

• Money measurement

• inflation

• consistency

Skills of workers or business having a good reputation cannot be expressed in monetary terms. Which accounting concept is being applied?

• Materiality

• Historic cost

• Business entity

• Money measurement

Revenue is recognized or accounted for by the seller when it is earned whether cash has been received from the transaction or not. Which accounting concept is being applied?

• Realisation

• Money measurement

• historic cost

• Business entity