LESSON 3.2

15問 • 1年前

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states that the transactions related to a business must be recorded separately from those of its owners and any other business.

Business Entity Principle

(also known as separate entity and economic entity concept)

Business Entity Principle

implies that the business entity will continue its operations in the future and will not liquidate or be forced to discontinue operations due to any reason.

Going concern principle

states that the life of a business can be divided into equal time periods. These time periods are known as accounting periods for which companies prepare their financial statements to be used by various internal and external parties.

Time period principle

(also known as periodicity assumption and accounting time period concept)

Time period principle

states that only those events and transactions are recorded in books of accounts of the business which can be measured and expressed in monetary terms. Amounts should only be stated into a single monetary unit.

Monetary unit principle

(also known as money measurement concept)

Monetary unit principle

states that accounting information and financial reporting should be independent and supported with unbiased evidence. This means that financial statements must be presented with supporting evidence.

Objectivity principle

is an accounting principle that records assets at their respective cash amounts at the time the asset was purchased or acquired. Assets that are recorded can include short-term and long-term assets, liabilities and any equity, and these assets are always recorded at their original cost.

Cost principle

is an accounting method where revenue or expenses are recorded when a transaction occurs rather than when payment is received or made.

Accrual Accounting Principle

is a principle that requires a company to match expenses with related revenues in order to report a company's profitability during a specified time interval. Therefore, cost should be matched with the revenue generated.

Matching principle

means expense has occurred and needs to be recognized even though no payment was made.

Incurred

is a concept that requires a business to report all necessary information about their financial statements and other relevant information to any persons who are accustomed to reading this information..

Disclosure principle

- is the general concept of recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received. In case of doubt, assets and income should not be overstated while liabilities and expenses should not be understated.

Conservatism principle

states that financial reports only need to include information that will be significant or material to their users. In case of assets that are immaterial to make a difference in the financial statements, the company should instead record it as an expense.

Materiality principle

2.1

Shekinah Bismonte · 58問 · 2年前

2.1