Remember the following accounting concepts:
- Accounting entity concept/economic entity,business entity concept- the business is a separate entity from its owners.
- Accrual concept-revenue is recognized when it is earned and expenses when they are incurred.
- Accounting period concept-the indefinite life of a busiess entity is divided into accounting periods for the purpose of preparing financial reports.
- Consistency concept-states that accounting methods and practises should not differ from period to period so as to enable comparisons between periods to be made.
- Going concern concept-is the assumption that a business will operate indefinitely.
- Historical cost concet-where all transactions are recorded at the original cost to the business.
- Money measurement-refers to the identification and measurement of economic events in financial terms ( say in USD).
- Matching principle/concept-revenue earned during an accounting period has to be matched with the expenses associated with the revenue generated.
- Objectivity concep- states that there must always be objective verifiable evidence for the occurence of any business transaction.
- Prudence concept-considers that it is prudent neither to overstate profits and assets nor understate losses and liabilities.
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