Accounting: Accounting Principles

Accounting Principles Chapter 10

Business entity

Business is considered separate from the owner, with personal assets and spending not reflected in the business's accounting records.

Consistency

Accounting methods should be applied consistently across accounting periods, with any changes noted on financial statements.

Duality

Every transaction involves two aspects - giving and receiving.

Going concern

Assumes the business will continue operating indefinitely without significant closure or downsizing intentions.

Historic cost

Assets and expenses are initially recorded at their actual cost in ledger accounts.

Materiality

Items that do not significantly impact profit or assets need not be recorded separately.

Money Measurement

Only information expressible in monetary terms can be recorded in accounting records.

Prudence

Ensures profits and assets are not overstated, while losses and liabilities are not understated.

Realisation

Revenue is recognized when legal ownership of goods transfers from seller to buyer.