Accounting policies and rules

Business entity concept

where the owners transactions must be separated from the business’s transactions and should not be recorded in the business book

Money measurement

It states that financial transactions can only be measured in monetary or money currency and recorded in accounting records

Historical cost

The purchase of price and assets should be recorded in its purchase price

Going concern

Business is expected and assumed to operate or continue for a long period of time

Consistency

The business must use the same depreciation method for each financial period

Prudence / conservation

assets and profits should not be understated and it should be anticipated

dual aspect

every transaction must have 2 entries / double entry

Matching / accrual concept

expense must be matched with revenue

Materiality

Low value assets will always be considered as an expense

Realization

Profits are only recognized when a legal obligation is paid

Reliability

Financial information is reliable if it’s error free and users can decide upon what it’s worth

comparability

information should be comparable with other businesses

Understandability

Financial information must be understandable and consistent that people with the knowledge of business understands it

Relevance

Information must be truthful and able to make a difference in user decision making

Objectivity/ objective principle

Financial information must be supported by evidence and not people’s opinions