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ACCOUNTING CONCEPT - Coggle Diagram
ACCOUNTING CONCEPT
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BUSINESS ENTITY
Business is treated as separate from its owners,
Not commingling personal and business finances
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ACCOUNTING PERIOD
Each business chooses atime period to complete a cycle of accounting process;
ex- monthly,quarterly or annually as per fiscal or calendar year
COMPLETE DISCLOSURE
Business must reveal both favourable and unfavourable information which are of value to all stakeholders.
MATCHING
For every entry of revenue recorded,an equal expense entry has to be recorded to determine correct net profit.
COST
Fixed assets are recorded at their original cost,
No rise or fall in market prices are considered
DUAL ASPECT
Every transaction affects two accounts,
if one account is debited then another account must be credited
MATERIALITY
Only focus on relevant and material facts, data is considered material if its knowledge impacts the users of financial statements
CONSISTENCY
Accounting principle and methods remain same every year,
example is method of charging depreciation.
CONSERVATISM
Anticipate all the losses, underestimate the profits
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REALISATION
Revenues are recognised when they are realized and not when cash is received,
credit sales are treated as revenue on the
day sales are made and not when money is received from the buyer