Concepts

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Business Entity

Businesses record and report the activities of a particular business.

(do not include assets and liabilities)

e.g..

the personal assets and liabilities are separate to the business. Main links between business and owner is capital and drawings

Materiality

Some items in account have such a low monetary value that they it is not worthwhile recording them separately e.g Material account

Examples include

Small expenses=Donations to charities, plants in office, window expenses (SUNDRY ACCOUNT)

End of year quantity such as pens, not valued for purpose of final accounts, However charged as an expense under income statement.

Material isn't enough to change final accounts.

Low non current assets e.g stapler would be under an expense instead of non current asset.

Materiality depends on size of the business, for example a large company may consider that items of less that £1000 are not material, a smaller business will use a much lower figure.

What is material and what isnt, is up to business

Cost

Assets and liabilities are recorded in final costs as an historical cost .eg actual amount of transaction involved.

advantage=balance sheet valuations are objective, no disputes shown.

Going Concern

This presumes that the business to which the final accounts relate will continue to trade in the foreseeable future.

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