Fundamentals of Accounting Methods

These flashcards cover the key concepts, principles, and characteristics of accounting as outlined in the lecture.

What is the purpose of the conceptual framework in accounting?

To lead to the creation of a consistent set of rules and standards for preparing financial statements.

Which body provides the framework for accounting standards?

The International Accounting Standards Board (IASB).

What are some qualitative characteristics of accounting information?

Relevance, reliability, understandability, comparability.

Explain the Going Concern Concept.

A business will continue in operational existence for the foreseeable future.

What does the Matching Concept in accounting require?

Expenses incurred are to be matched against revenue earned.

What is the Money Measurement Concept?

Financial accounting only records transactions that can be measured in monetary terms.

What does the Prudence Concept entail?

Accountants should anticipate and make provisions for losses and expenses rather than income and gains.

What is the Historical Cost Concept?

Assets and expenses should be shown at acquisition cost, not current market value.

Define the Consistency Concept in accounting.

There should be consistency of accounting treatment of like terms from one period to the next.

What is the Duality Concept?

Every transaction affects two parties: the party to be debited and the party to be credited.

In accounting, what is the difference between Cash Basis and Accrual Basis?

Cash Basis recognizes revenues and expenses when cash is received or paid, while Accrual Basis recognizes them based on economic events.