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03 - Professional Ethics & Accounting Concepts

Accounting concepts include: the business entity concept which separates business transactions from owner transactions; the materiality concept which excludes insignificant items from recording; the consistency concept which requires similar items be treated the same in all periods; the accruals concept which matches revenues and expenses to the period they relate rather than when cash is received or paid; the money measurement concept which only includes monetary transactions; and the prudence concept which takes a conservative approach when preparing financial statements.

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Khine Myo Tint
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109 views

03 - Professional Ethics & Accounting Concepts

Accounting concepts include: the business entity concept which separates business transactions from owner transactions; the materiality concept which excludes insignificant items from recording; the consistency concept which requires similar items be treated the same in all periods; the accruals concept which matches revenues and expenses to the period they relate rather than when cash is received or paid; the money measurement concept which only includes monetary transactions; and the prudence concept which takes a conservative approach when preparing financial statements.

Uploaded by

Khine Myo Tint
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Accounting Concepts – B M C A M P

Business Entity
The business entity sates that transactions associated with a business must be
separated recorded from those of its owner or other businesses.

Materiality
Materiality concept applies when the value of an item is relatively insignificant and
does not warrant separate recording. E.g The purchase of a box of paper clips, a
calculator or a small clock for the office.

Consistency
Consistency concept requires that similar items are treated in the same way, not only
in one period but in all subsequent periods. It states that when a business has
adopted a method for the accounting treatment of an item, it should treat all similar
items in the same way when preparing the financial statements.

Accruals
Accruals concept means that all revenues and expenses must be relevant to that
related accounting period. It also states that profit for the year is the difference
between revenues and expenses rather than the difference between cash received
and cash paid.

Money Measurement
Money measurement concept states that only transactions and activities that can be
measured with monetary measures.

Prudence
Prudence concept means that accountants should have use a conservative approach
when preparing financial statements. They should not overstate revenue/ assets and
not understate losses and liabilities.

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