Accounting Concepts Explained

Accounting Concepts Explained

1. Dual Aspect Concept

   • Business is a "Living Entity" and owns resources known as assets. Owners have a claim in the form of capital investment
   • Transactions have both a credit and debit. Liabilities represent a debit to the company while assets represent a credit
   • Assets = Liabilities + Equity

2. Busines Entity Concept

   • Business must be treated seperately as a "Living Entity" but only applies to Limited companies
   • Records are kept of the business entity and not the owners and must be labelled with the busness name

3. Money Measurement Concept

   • The classification of financial records relating to which monetary values can be attached
   • Exception: Cannot put a monetary value on skill or motivation (and as such are not recorded)

4. Historic Cost Concept

   • Assets are recorded at there original value and don't change until sold or retired
   • Gives a historic account of goods that are bought and sold

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