Accounting Principles and Concepts

Front

What is the Historical Cost Principle?

Back

Assets must be recorded at their original purchase price (cash amount paid at acquisition).

Front

Define the Accounting Entity Concept.

Back

The business is treated as separate from its owner; only business transactions are recorded.

Front

What is the Going Concern Principle?

Back

Assumes the business will continue operating indefinitely (not liquidating soon).

Front

What does the Monetary Principle state?

Back

All transactions must be recorded in a common monetary unit (e.g., dollars).

Front

What is the Accounting Period Concept?

Back

Business life is divided into fixed periods (e.g., months/years) for reporting.

Front

What are balance day adjustments?

Back

Entries made to match revenues/expenses (e.g., prepayments, accruals, depreciation).

Front

How is a provision for doubtful debts classified?

Back

As a negative asset on the Statement of Financial Position.

Front

What’s the difference between cash and accrual accounting?

Back

Cash: Records transactions when cash is paid/received. Accrual: Records when the economic event occurs.

Front

What is Working Capital?

Back

Current Assets − Current Liabilities (measures short-term liquidity).

Front

How does depreciation affect financial statements?

Back

Reduces profit (expense on Statement of Profit or Loss) and asset value (accumulated depreciation on Statement of Financial Position).