Account

Economic Entity

Assumes that business is separate and distinct from its owner and from every other owner. In other words, the records and reports of a business should not  include either the transaction or assets of another business or personal assets and transactions of its owner or owners.


Going Concern

Continue to operate in the foreseeable future,using assets to carry operations, and with the exception of merchandise,not offering the assets for sale. Concepts assumes that the business enterprise will have a long life, and it will last long enough to fulfill their objectives and commitments.


Money Measurements

Assumption that the purchasing power of the unit of measure used in the accounting, the RM, does not change. this is done due to the following reasons :

• money is the common denominator
• monetary unit provides an appropriate basis for accounting,measurement, and analysis
• monetary is the most effective means of expressing to interested parties changes in capital, and exchange of goods and services.

Periodicity

measure the assets, liabilities, and owner's equity at a given point in time. Which is usually done al least on an annual basis. To do this income needs to be measured during the intermittent period. Example, January 1 through December 31.


Historical Cost

Accounting is concerned with past events and it requires consistency and comparability that is why it requires the accounting transactions to be recorded. The amount of resources given up to acquire the assets or consume the service or the amount of liabilty incurred.


Consistency

Similar items within a single set of accounts should be given similar accounting treatment. The same treatment should be applied from one period to another in accounting for similar items. This enables valid comparisons to be made from one period to the next.


Accrual or Matching

States that revenue and costs must be recognized as they are earned or incurred, not as money is received or paid. They must be matched with one another so far as their relationship can be established or justifiably assumed, and debit with in the profit and loss account of the period to which they relate.


Realization

The revenue is earned when the goods are transferred. It means that profit is deemed to have accrued when property goods passes to the buyer or when sales are made.


Dual Aspect

Every change in one element of an entity (assets,liabilities, equity) is accompanied by another change similar amount, but in an opposite direction. This principle underlies the basis of double-entry book-keeping.


Materiality

Some items disclosed in accounts are regarded as particular sensitive and even a very small  misstatement of such an item would be regarded as material.


Prudence

Revenues and profits are not anticipated. They are recognized in the profit and loss account only when realized either in the form of cash or of other assets.

 p/s : These facts should be memorized and remembered always, if do not want a headache answered questions in the examination. HAHA ! !