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Unit 2 - accounting concepts
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- 1what is the going concern concept?when accounts are prepared it is assumed that the business is going to continue to operate for the foreseeable future and assets are recored at cost
- 2what is the accrules concept?says that income statements should be based on income and expenditure not receipts and payments.
- 3what is the prudence concept?means that accountants always consider the worst scenario and understate rather than overstate profits and assets values.
- 4example of a prudence conceptrevceibavles might not pay the full amount back hence they need to make provision for doubtful debts
- 5what is the consistency concept?means that once an accounting policy has been decided the firm should continue to use the same policy in subsequent years when preparing the financial statement unless there is a good reason for changing
- 6example of the consistency conceptconsistency concepts says keep the rate of 25% but the prudence concept say change to 50% so he should change it to 50%
- 7what is the realisation concept?sales are recored when the customer physically removes the goods and the business raises a sales invoice and purchases when a supplier deliver goods regardless of when any payment is made or when the customer promisies to buy the goods
- 8what is the (business) entity concept?for accounting purposes the owner =s of the business are regarded a completely separate from the business
- 9what is the materiality concept?this concept is relevant when making the distinction between capital or revenue items
only use it if it makes materiality significance difference - 10what it the dual aspect concept?the double entry system fro every dr there must be a bathing cr and vice versa
- 11what is the objectivity concept?accountants should not show personal bias and transactions should be based on evidence such as source documents
- 12what is the cost concepts?a company records assets on the balance sheet as historical cost which is how much the business originally paid for an asset
- 13where do revenue items go?revenue items go onto the income statment
- 14where does capital items go?they go onto the balance sheet
- 15what does NVR mean?it means net reliable value how much the goods could be sold for less any costs in making it into sealable condition.
- 16what is cost?how much the business originally paid for the goods.
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- AS - Level Accounting Fichas sobre Unit 2 - accounting concepts, creado por naomi123_ el 14/04/2016.
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