Accounting Principles and Qualitative Characteristics of Accounting

Verifiability

Information should be faithfully represented

Understandability

Information is clearly and concisely classified, characterised And presented.

Comparability

allows users to identify similarities and differences between financial statements after ensuring that it has used the same accounting method.

Faithful Representation

information should be complete, neutral and free from bias

Relevance

the information should be appropriate and must have predictive and confirmatory value.

Timeliness

Information is available to users before it loses its capacity to influence their decisions

Going Concerns

Entity will remain in business for the foreseeable future

Accruals

sales revenue is recognised when goods and services have been supplied, costs are incurred when goods and services have been received

Consistency

Transaction and Valuation methods are treated the same way

Prudence

Assets or income should never be overstated and liabilities or expense should never be understated.

Business Entity

Business is treated as separate entity from the business owner (e.g. when business owner takes money from the business for personal use and record it as Drawings.)

Materiality

When an item in business are treated as expense rather than non-current assets.

Money Measurement

only business monetary transaction should be recorded in financial statements.