Matching Accounting Theories Level1

Only business transactions that can be measured in monetary terms are recorded.

• Money

• Historical Cost

• Monetary

• Materiality

The life of a business is divided into regular time intervals to allow financial statements to be prepared at regular time periods, e.g., monthly or yearly.

• Accounting Period

• Objectivity

• Consistency

• Revenue Recognition

Accounting information recorded must be supported by reliable and verifiable evidence so that financial statements will be free from opinions and biases.

• Prudence

• Matching

• Revenue Recognition

• Objectivity

Expenses incurred must be matched against income earned in the same period to determine the profit for that period.

• Accounting Entity

• Matching

• Going Concern

• Accrual Basis of Accounting

Business activities that have occurred, regardless of whether cash is paid or received, should be recorded in the relevant accounting period.

• Accrual Basis of Accounting

• Accounting Period

• Accounting Entity

• Accounting Theory

Relevant information should be reported in the financial statements if it is likely to make a difference to the decision-making process.

• Revenue Recognition

• Consistency

• Objectivity

• Materiality

Business and owner are treated as two separate entities. All transactions are recorded from the point of view of the business. Only business transactions affecting the business are recorded in the business books.

• Monetary

• Accounting Entity

• Accounting Period

• Accrual Basis of Accounting

A business is assumed to have an indefinite economic life unless there is credible evidence that it may close down.

• Prudence

• Historical Cost

• Objectivity

• Going Concern

Once an accounting method is chosen, this method should be applied to all future accounting periods to enable meaningful comparison.

• Matching

• Prudence

• Consistency

• Revenue Recognition

Transactions should be recorded at their original cost.

• Historical

• Going Concern

• Objectivity

• Monetary