Accounting concepts and source documents

What are the principles behind the accounting standards?

• Reliability

• Going concern

• Comparability

• Equality

A business must use the concept of ​ (a)   when including items in the financial statements as this indicates the significance of each item.

• going concern
• materiality
• money measurement

---------- -------- are the "proper" way of recording and presenting accounting transactions.

Why might a business need to retain proof of transactions?

Answer explanation

Proof needs to retained as a legal requirement, tax purposes, in the event of returns and accounts preparation.

A business is recognised as being separate from its owner through the (a)   concept.

• business entity
• prudence
• going concern

Reorder the following

• Purchase receipt

• Purchase credit note

• Purchase invoice

• Goods received note

Match the following

• Purchase invoice

• The return of purchased inventory to your supplier which were originally bought on credit

• Purchase credit note

• Direct Debit or Standing Order payment for Utility bill

• Receipt

• Purchase of inventory on credit

• Sales credit note

• The payment for petrol by cash

• Bank statement

• The return of sold items to you from your customer which were originally bought on credit

What does sale on credit mean?

• Goods are sold but payment is not yet received

• A credit card is sold

• Goods are sold

• Payment for goods sold is made by credit card

The prudence concept ensures that assets and income are not ​ (a)   .

• over stated
• under stated

The consistency concept means that

• businesses must be consistent in paying creditors

• the accounting formats must be consistent

• the accounting treatment must be consistent