Accounting: Accounting Principles

Business entity
Business is treated as being completely separate from the owner of the business.

·         Personal assets of the owner , the personal spending of the owner – do not appear on the accounting records of the business.

·         Accounting records relate to the business records of assets and liabilities of the business.

·         When the owner introduces fund or resources = capital

·         When the owner takes or uses funds or resources = drawings

Consistency
The method be used consistently from one accounting period to the next.

·         Effects of changes must be noted on financial statements.

Duality
Every transaction has two aspects – giving and receiving

Going concern
It is assumed that the business will continue to operate for an indefinite period of time and that there will be no intention to close down the business or reduce the size of the business by any significant amount.

Historic cost
all assets and expenses are initially recorded in the ledger accounts at their actual cost.

Materiality
Individual items which will not significantly affect e9ther the profit or the assets of a business do not need to be recorded separately.

Money Measurement
Only information which can be expressed in terms of money can be recorded in the accounting records.

Prudence
Means that profit s and assets should not be overstated and loses and liabilities should not be understated

Realisation
Revenue is only regarded as being earned when the legal title to goods passes from the seller to the buyer.