accounting

• accounting assumptions: the generally accepted rules that govern the way accounting information is recorded
• accounting entity assumption

  The assumption that the records of assets, liabilities and business activities of the entity are kept completely separate from those of the owner of the entity as well as from those of other entities
• going concern assumption

  The assumption that the business will continue to operate in the future, and its records are kept on that basis
• period assumption


  The assumption states that the reports are prepared for a particular period of time, such as a month, or a year, in order to obtain comparability of results
• accrual basis assumption

  The assumption that the Elements of the reports are recognised when they satisfy the definitions and recognition criteria, meaning profit is calculated as revenue earned in a particular period less expenses incurred in that same period
• qualitative characteristics:

  the qualities of the information in Accounting reports
• relevance

  states that financial information must be capable of making a difference in the decisions made by users of the report → Essentially financial information that is recorded must be relevant. This information needs to be related to an economic decision at hand, hence relevant to the entity [i.e not other branches of the company], relevant to the time period
• faithful representation

  states that the financial information reported is a faithful representation of the real-world economic event it claims to represent. It should be complete, not have any errors or influenced by someone’s personal opinion. It should be based on factual information, not biased opinions.
• comparability

  states that useful information is provided when the financial reports of a business can be compared over time and compared with similar information of other businesses. However, this can only occur when if the business has been consistent with its Accounting procedures.
• verifiability


  states that the information must be able to be proven. Every transaction must be verified with some form of source document as evidence, and in doing so, everyone can come to the same conclusion. Therefore, independent individuals can check the supporting evidence to show that the financial information is free from bias and provides a Faithful representation.
• timeliness

  states that financial information should be available to decision makers in time to be capable of influencing their decisions
• understandability

  states that financial information should be understandable or comprehensible to users , and presented clearly and concisely. Even those without Accounting knowledge should be able to understand the Accounting reports (i.e tables, graphs, charts, flowcharts etc.)