Chap 1 - Accounting concepts

Relevant accounting information should be reported in the financial statements if it affects decision-making.

Transactions are recorded at their original cost which is reflected in their source documents.

Only business activities that can be measured in monetary terms are recorded.

Business activities are recorded in the period they have occurred, whether cash is received or paid.

Dividing the life of a business into regular time intervals to report its financial performance

To choose accounting treatments that least overstate assets/profits & least understate losses.

The business and owner are separate entities, transactions are recorded are recorded from business point of view.

The same accounting method should be applied to enable meaningful comparisons.

To match all expenses incurred to all income earned for the same accounting period.

Revenue is earned when goods have been delivered or services have been provided.

Assumes a business has indefinite economic life unless there is evidence to show its closure.

Transactions are recorded using reliable and verifiable information eg source documents.