,The accounting principle/ concept
Principle Explanation
1 Business entity The business and its owner are treated as separate
and difference entities.
2 Going concern Business is assumed to operate for an indefinite period
of time.
3 Accounting period Life span of business divided into fixed periods of time.
4 Money measurement Only transactions that can be measured in monetary
terms are included in the accounting records.
5 Historical Cost Transactions are recorded at the original cost to the
business.
6 Materiality Amount which is immaterial is treated as an expense.
7 Duality The two- fold aspect of each transactions affects a
business in two different ways.
8 Accrual basis/ Matching Any expenses for the financial year is matched against
the revenue for that same period.
9 Realisation Revenue recognize when it is realized.
10 Prudence/ Conservatism To ensure that profit is not overstated and the value of
the fixed asset is not understated.
3 Consistency The same accounting method should be applied to an
item for all the accounting periods.
Accounting Policies
Concept Explanation
1 Understandability Accounting information in such a way that it will be
understandable to users
2 Relevance Accounting information is to assist user in forming,
revising or confirming expectations about the future
and as a basis for financial decisions.
4 Comparability It must be recognised that a financial report can only
be compared with reports for other periods if
similarities and differences can be identified.
5 Reliability Information provided in financial statements must be
reliable and it must be free from bias and significant
errors.
, Source document are the • Invoice
records of biz. transaction. • Debit note
• Serve as proof that a Source document • Credit note
• Bank statement
transaction has taken
• Petty cash voucher
place
• Enable the auditing
Journal is not part of the • Sales Journal
double entry bookkeeping. It • Purchases Journal
is also known as “day book”
Journal •
•
Return inwards Journal
Returns outwards journal
• Correction of errors
• Cash book/ Petty cash book
• Purchase & sales of fixed
• General journal
asset on credit
The purpose of ledger • Sales ledger
• Purchases ledger
• Facilitate easy referencing
•
• Reduce the details Ledger General ledger
entered in the general
ledger.
The purpose of trial balance
• To check the Trial balance Purchases Expenses Asset Dr
mathematical accuracy of
accounting -"PEARLS"
• To prepare final accounts
Revenue Liability Sales Cr
The purpose of income
statement Income statement/
• Calculation of profit&loss for Trading,Profit &
the accounting period
shown in the final accounts
Loss
The purpose of balance sheet
Balance sheet/
• Financial statement showing
liabilities, asset & capital at
Statement of
the end of financial period. financial position
Principle Explanation
1 Business entity The business and its owner are treated as separate
and difference entities.
2 Going concern Business is assumed to operate for an indefinite period
of time.
3 Accounting period Life span of business divided into fixed periods of time.
4 Money measurement Only transactions that can be measured in monetary
terms are included in the accounting records.
5 Historical Cost Transactions are recorded at the original cost to the
business.
6 Materiality Amount which is immaterial is treated as an expense.
7 Duality The two- fold aspect of each transactions affects a
business in two different ways.
8 Accrual basis/ Matching Any expenses for the financial year is matched against
the revenue for that same period.
9 Realisation Revenue recognize when it is realized.
10 Prudence/ Conservatism To ensure that profit is not overstated and the value of
the fixed asset is not understated.
3 Consistency The same accounting method should be applied to an
item for all the accounting periods.
Accounting Policies
Concept Explanation
1 Understandability Accounting information in such a way that it will be
understandable to users
2 Relevance Accounting information is to assist user in forming,
revising or confirming expectations about the future
and as a basis for financial decisions.
4 Comparability It must be recognised that a financial report can only
be compared with reports for other periods if
similarities and differences can be identified.
5 Reliability Information provided in financial statements must be
reliable and it must be free from bias and significant
errors.
, Source document are the • Invoice
records of biz. transaction. • Debit note
• Serve as proof that a Source document • Credit note
• Bank statement
transaction has taken
• Petty cash voucher
place
• Enable the auditing
Journal is not part of the • Sales Journal
double entry bookkeeping. It • Purchases Journal
is also known as “day book”
Journal •
•
Return inwards Journal
Returns outwards journal
• Correction of errors
• Cash book/ Petty cash book
• Purchase & sales of fixed
• General journal
asset on credit
The purpose of ledger • Sales ledger
• Purchases ledger
• Facilitate easy referencing
•
• Reduce the details Ledger General ledger
entered in the general
ledger.
The purpose of trial balance
• To check the Trial balance Purchases Expenses Asset Dr
mathematical accuracy of
accounting -"PEARLS"
• To prepare final accounts
Revenue Liability Sales Cr
The purpose of income
statement Income statement/
• Calculation of profit&loss for Trading,Profit &
the accounting period
shown in the final accounts
Loss
The purpose of balance sheet
Balance sheet/
• Financial statement showing
liabilities, asset & capital at
Statement of
the end of financial period. financial position
