PreQ Accounting: Concepts

Theory of everything

The Entity concept

The financial/economic affairs of the business are separate and distinct from the financial/economic affairs of the owner

Concept of Duality

For every debit there is a credit

Money measurement

transactions are measured in monetary terms (goodwill is not often shown in the balance sheet)

Concept of going concern

Financial Reports are prepared on the assumption that the entity will continue in existence for the foreseeable future

Concept of Historical cost

All transactions are recorded at the cost paid at the time of the transaction

Period Reporting Concept

The life of a business is divided into periods of equal length for reporting purposes

Realisation Concept

Items/ transactions are recorded in accounting when they have become a fact

accrual concept

recognizing revenues and expenses when they are earned or incurred, regardless of when cash is received or paid