Accounting Concepts Flashcards
What are accounting concepts and conventions?
Accounting concepts have been established by professional organisations and a standard principles that must be followed when preparing financial accounts.
Accounting conventions are generally accepted practices that can be changed and updated over time, depending upon the requirements of financial reporting.
What is the accrual on matching concept?
The accrual on matching concept as evidence and profit or loss is being calculated for a given financial period and in order to do so the income for that given period of time is matched to the expenses for that same period of time.
In other words revenue & the period must be matched with expenses spent to earn the revenue within the same period.
What is the Prudence of conservatism concept?
This concept states accountants should always be Conservative on the side of caution hence, where there is doubt:
Assets and profits should be understated;
Liabilities and losses should be overstated.
What is the consistency concert?
This concept states the policies of the accounting treatment of an item should be carried out exactly the same way year after year so that comparisons of performance can be made on a valid basis.
What is a separate entity or business concept?
This concept states that all the transactions affecting the financial position of the business are recorded in the box of accounts. The owner’s private financial affairs are not to be recorded in the books.
What is a dual aspect or double entry concept?
This concept states that in a transaction, the giving of value and receiving of value occurs. Simply, one person gives up something of value to receive something of value.
