Accounting concepts

Expenses & income are matched to the time period when they should have been incurred or received

• Business entity

• Consistency

• Accruals

• Going Concern

Accounting policies should not be changed unless there is good reason to do so.

• Business entity

• Consistency

• Accruals

• Going Concern

Personal assets and liabilities of the owner of a business should not be included in the business's financial statements

• Business entity

• Consistency

• Accruals

• Going Concern

Money is used to record and report all business transactions

• Cost

• Money Measurement

• Duality

• Materiality

All financial transactions have 2 equal and opposite entries.

• Cost

• Money Measurement

• Duality

• Materiality

Items with a low monetary value are recorded in the financial statements, but not separately.

• Cost

• Money Measurement

• Duality

• Materiality

Inventory is valued at the lower of ...

• Cost and net realisable value, following the accruals concept

• Cost and net realisable value, following the materiality concept

• Cost and net realisable value, following the realisation concept

• Cost and net realisable value, following the prudence concept

Business transactions are recorded when the legal title (ownership) passes between buyer and seller

• Going concern

• Prudence

• Accrual

• Realisation

The financial statements are prepared on the assumption that the business will continue to trade for the foreseeable future.

• Going concern

• Prudence

• Accrual

• Realisation

Assets and liabilities should be recorded at historical cost

• Cost

• Prudence

• Accrual

• Realisation