Ten Accounting Concepts. Business Entity A business’ financial information is recorded and reported separately from the owner’s personal financial information.

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Presentation transcript:

Ten Accounting Concepts

Business Entity A business’ financial information is recorded and reported separately from the owner’s personal financial information.

Going Concern Financial statements are prepared with the expectation that a business will remain in operation indefinitely.

Accounting Period Cycle Changes in financial information are reported for a specific period of time in the form of financial statements.

Objective Evidence Each transaction is described by a business document that proves the transaction did occur.

Unit of Measurement All business transactions are recorded in a common unit of measurement – the dollar.

Realization of Revenue Revenue from business transactions is recorded at the time goods or services are sold.

Matching Expenses with Revenue Revenue from business activities and expenses associated with earning that revenue are recorded in the same accounting period.

Historical Cost The actual amount paid or received is the amount recorded in accounting records.

Adequate Disclosure Financial statements should contain all information necessary for a reader to understand a business’ financial condition.

Consistent Reporting In the preparation of financial statements, the same accounting concepts are applied in the same way in each accounting period.