CHAPT 2: Accounting principles

• Accounting concepts:

  1. consistency - choosing a accounting method ( cant be change unless its better then the method before)
  2. accruals/matching - recorded expenses
  3. Going concern - business that is not expected to be closed in a short period of time.
  4. Materiality
  5. Business entitiy - personal income of the owners should not be treated as the income of the busines.
• Consistency:

  • Choosing an accounting method that cannot be changed unless it is better than the method used before
• Accruals/matching:

  • Recorded expenses
• Going concern:

  • Refers to a business that is not expected to be closed in a short period of time
• Materiality
• Business entity:

  • Personal income of the owners should not be treated as the income of the business
• Money measurements:

  • All transactions are recorded in terms of money (RM)
• Historical cost:

  • Focuses on the original value instead of the current value
• Periodicity:

  • Financial statements are maintained quarterly, monthly, and yearly
• Prudence/Conservatism:

  • Possible losses are included in the financial statement
• Realization:

  • Sales are recognized when the goods are sold and delivered to the customer or services are rendered