Duality and Measurement in Accounting

These flashcards cover the concepts of duality in accounting and the measurement bases used, including historic cost and current value.

What is the concept of duality in accounting?

Duality means every transaction has two sides, affecting two general ledger accounts.

What happens when a business makes a sale on credit?

Trade receivables (assets) and sales both increase.

What are the two measurement bases mentioned in the lecture?

Historic cost and current value.

What is historic cost?

The price paid for an asset when purchased.

What is one main advantage of historic cost accounting?

It is reliable and verifiable because it is based on an actual transaction.

How does fair value differ from historic cost?

Fair value is the price received for selling an asset in a genuine market transaction.

What is value in use?

The value of an asset based on the income it generates for a specific entity.

What does current cost represent?

The cost of an equivalent asset at the measurement date, taking into account depreciation.

Why is current value considered more relevant than historic cost?

Current value reflects today's market conditions and assists in decision-making about future cash flows.

What would the fair value of an asset be based on?

The market price received in an orderly transaction between sellers and buyers.