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concepts and conventions (conventions (. (conservatism (should always be…
concepts and conventions
foundation
conventions
accepted practices
commonly used
.
full disclosure
conservatism
should always be on the safe side
not expectation of profit and revenues
materiality
minor and insignificant items arent recorded
consistency
universally followed
helps in comparing
concepts
assumptions
theories
rules
concepts
money measurement
considers transactions or events which can be measured in terms of money.
feelings will not be recorded
provides a common unit of measurement
accounting period
measuring results periodically
life of the company is split into small periods
to measure performance
going concerns
one of the main assumptions in accounting
business will continue forever
history cost
assets and liabilities should record at their initial cost
market price is ignored
purchase cost + cost to bring it into intended use
business entity
business and owner are separate
dual- aspect
every debit has a credit
every transaction having a two sided effect
matching
revenue has to be matched to expenses
both recorded in the same period
realisation
revenue is recorded only when product is provided
cant record revenue when there is order or when cash is received