Title 15. PRINCIPLES OF ACCOUNTS 10.pdf ✅

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 Objectivity  Dual aspect  Consistency  Accrual  Materiality  Periodical 5 Explain the accounting concepts  Cost – It means assets are shown at cost price, and that this is the basis for valuation of the asset.  Prudence – This is the inclusion of a degree of caution in the exercise of the judgment needed in making the estimates required under conditions of uncertainty (e.g. decisions relating to bad debts and allowances for doubtful debts), such that assets and income are not overstated and liabilities and expenses are not understated. To take into account unrealized losses.  Going Concern – it is assumed that the business will continue to operate for at least months after the end of the reporting period. Business will continue for a long time  Business entity - Implies that the affairs of a business are to be treated as being quite separate from the non- business activities of its owner(s). Assumptions that only transactions that affect the firm and not the owner’s private transitions will be recorded.  Objectivity – the use of a method which arrives at a value that everyone can agree to because it is based upon a factual occurrence.  Dual aspect – this states that there are two aspects of accounting, one represented by the assets of the business and the other by the claims against them. The concept states that these two aspects are always equal to each other. Double entry system means every transaction will be posted on the Dr and Cr side with the same amount Assets = Capital + Liabilities  Consistency - Transaction of a similar nature should be recorded in the same way in the same way in the same accounting period and in all future accounting periods.  Accrual – Net Profit is the difference between revenues and the expense incurred in generating those revenues i.e. Revenues – Expenses = Net Profit The effects of transactions and other events are recognized when they occur and they recorded in the books and reported in the financial statements of the period to which they relate.  Materiality –means an item purchased will be treated as an expense or non-current fixed asset according to the size of the organization and accountants’ judgment. Items of material value are recorded as assets and