Concepts Flashcards
What is the going concern concept
The assumption that a firm will continue to operate for the foreseeable future.
What is the accruals concept?
Accounting for transactions when the transaction takes place and not when money changes hands.
What is revenue recognition?
Assumes that a sale has taken place when the goods are delivered and not when the proceeds of the sale are received.
What is the realisation concept?
Assumes that profits are only realised when cash or other assets are received.
What is the prudence concept?
Assumes that all financial statements have been prepared on a prudent basis.
What is the matching concept?
Dictates that companies report expenses at the same time as the revenues they’re related to.
What is the entity concept?
The assumption that financial statements represent the performance and financial position of just the business.
What is the materiality concept?
Information is deemed material if it’s omission or misstatement could influence decisions that users make.
What is the time period concept?
Dividing the life of an entity into discrete periods for the purpose of preparing financial statements.
What is the money measurement concept?
Assumes that the performance of an entity will be expressed in monetary amounts.
What is the duality concept?
Assumes that every transaction affects two accounts in a set of financial statements.
What is the substance over form concept?
Assumes that when accounting for transaction, the preparer should look at the economic substance rather than it’s legal form.
What is the consistency concept?
Allows users to look at financial statements over a number of years and assume that the same methods, policies and estimation techniques have been used.
What is the separate determination concept?
In determining the aggregate amount of each asset or liability, the amount of each individual asset or liability should be determined separately from the others.
What is the recognition concept?
The process of including an item in either the statement of financial position or in the statement of comprehensive income.
