Unit_2_-_Accounting_Principles__3_

Capital Expenditure

Funds used by a company to acquire, upgrade, or maintain fixed assets.

Revenue Expenditure

Expenses incurred on a day-to-day basis for maintaining a company's earning capacity.

Capital Receipts

Receipts that create liability or reduce an asset, such as loans or funds from shareholders.

Revenue Receipts

Receipts that neither reduce assets nor create liabilities and are earned during normal business operations.

Contingent Assets

Possible assets whose existence will be confirmed only by the occurrence of uncertain future events.

Contingent Liabilities

Possible obligations arising from past events whose existence is confirmed only by uncertain future events.

Accounting Policies

Rules and guidelines selected by a company for preparing and presenting its financial statements.

Accounting Valuation

The process of valuing a company’s assets and liabilities for financial reporting.

Accounting Estimates

Approximations of business transactions used in accrual accounting when precise measurement is unavailable.

GAAP (Generally Accepted Accounting Principles)

Framework of accounting standards, principles, and procedures used in financial reporting.

Capitalization

The process of recognizing a cost as a long-term asset rather than an expense.

Matching Principle

Expenses should be recorded in the same period as the revenues they help generate.

Revenue Recognition

The accounting principle that dictates when revenue should be recognized in the financial statements.

Historical Cost Principle

Assets are recorded at their original cost at the time of purchase.

Materiality

An accounting principle that requires all significant information to be included in financial statements.

Conservatism Principle

Accounting practice of recognizing expenses and liabilities as soon as possible, but only recognizing revenues when certain.

Objectivity Principle

Accounting should be based on objective evidence and free from personal bias.

Cost Benefit Principle

The benefit of providing financial information should outweigh the costs associated with obtaining it.