4701722
Description
Flashcards by rachael.riddoch, updated more than 1 year ago
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Created by rachael.riddoch
about 8 years ago
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| Question | Answer |
| MATCHING | An important accounting convention that involves the 'matching' of sales and expenses, so that all of the expenses incurred in making a sale are deducted from it. (Also referred to as accruals) |
| ACCRUALS | Assumption that the effects of transactions and other events are recognised when they actually occur - not when the transactions are settled in cash, e.g. calendar year/financial year. (Also known as matching) |
| GOING CONCERN | Assumes that the organisation for which financial statements are prepared will continue in operation for the foreseeable future. |
| PRUDENCE | Ensuring that profit is not shown as being too high, or that assets are not shown at too high a value and that the financial statements are neutral: that is, that neither gains nor losses are understated or overstated. |
| EQUITY | The net assets of a company after all creditors have been paid off. |
| MATERIALITY | The concept that something should only be included in the financial statements if it would be of interest to the stakeholders, i.e. to those people who make use of financial accounting statements. It need not be material to every stakeholder, but it must be material to a stakeholder before it merits inclusion. In effect it means 'big enough to bother about'. The basic test of materiality is - if the reader of the accounts would form a different opinion if they knew about it, then it is material. |
| REALISATION | A profit arising from revenue which has been earned by the entity and for which there is a reasonable prospect of cash being collected in the near future. |
| ENTITY | Something that exists independently, such as a business which exists independently of the owner. |
| HISTORIC COST | Method of valuing assets and liabilities based on their original cost without adjustment for changing prices. |
| CONSISTENCY | The measurement and display of similar transactions and other events is carried out in a consistent way throughout an entity within each accounting period and from one period to the next, and also in a consistent way by different entities. |
| DUAL ASPECT CONVENTION | The accounting convention that holds that each transaction has two aspects and that each aspect must be reflected in the financial statements. |
| MONEY MEASUREMENT | Money Measurement Concept in accounting, also known as Measurability Concept, means that only transactions and events that are capable of being measured in monetary terms are recognised in the financial statements. - |
| OBJECTIVITY | The objectivity principle states that accounting information and financial reporting should be independent and supported with unbiased evidence. This means that accounting information must be based on research and facts, not merely a preparer's opinion. |
| PERIODICITY | Also known as the time period assumption, periodicity is an accounting rule that time can be divided into distinct and consecutive periods and that accounting transactions can be allocated to these periods using criteria laid out by other rules and principles. |
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