Accounting

• The prudence principle requires accountants to be cautious and choose the option that is least likely to overstate assets and income.
• Debits are recorded on the left side of an account, while credits are recorded on the right side.
• The credit entry increases a liability/expense account or decreases an asset account.
• The debit entry increases an asset account or decreases a liability/expense account.
• Accountants use the double-entry bookkeeping system to record transactions.
• The accounting equation is Assets = Liabilities + Owner's Equity
• The conservatism principle requires accountants to choose the option that is least likely to overstate assets and income.
• Accounting theories
• Revenue recognition occurs when goods have been delivered or services rendered.
• According to the matching principle, expenses must be matched with revenues from the same period.
• Financial statements are prepared using the accrual basis of accounting, which means they reflect economic events when they occur rather than when cash changes hands.
• Expenses are recorded as they occur, regardless of whether cash has been paid out yet.
• Accrual basis of accounting recognizes revenue and expenses at the time they occur, even if not immediately received or paid.
• Expenses are recorded as liabilities until they are paid.
• Cash basis accounting records revenue and expense transactions only when cash changes hands.
• Accrual basis accounting recognizes revenue and expense transactions at the time of sale/purchase regardless of whether cash has changed hands.
• Income is recognized when it becomes available and measurable.
• accounting entity
• going concern assumption
• time period assumption