GAAPS BAF3M1

Business Entity concept

: Business’ act as their own individual in law and financially. Keeping personal finances separate from business finances. Such as personal car purchase

Continuing Concern/ Growing concern concept:

The business will run/ continue in operation unless said otherwise.

Cost Principle:

Record assets with the price you originally paid for, not market value

Revaluation Model:

You can update the value of assets based on how the market changes (rising or falling prices)

Conservatism Principle:

Be realistic and fair for financial reports. Don’t downplay or overshoot

Objectivity Principle:

Accounting records (source documents) should be clear, verifiable, unbiased and factual evidence. Source documents support the objectivity of transactions. (originate from third party, factual evidence)

Time Period Concept/ Fiscal Period:

Accounting will take place over a specific period of time known as fiscal period (12 consecutive months). Fiscal period must be in equal length so financial progress can be measured period by period.

Matching Principle:

States that expenses must be recorded in the same time period as the revenue they helped to earn. Not necessarily when paid in cash

Revenue Recognition:

States that revenue must be recorded in the same time period as they are earned. Not necessarily when cash was received are received