Basic Accounting Principles
Basic Accounting Principles Accounting 101
Popular in Elementary Accounting
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This 2 page Study Guide was uploaded by Portia Notetaker on Wednesday June 17, 2015. The Study Guide belongs to Accounting 101 at Yale University taught by Professor Xavier in . Since its upload, it has received 140 views. For similar materials see Elementary Accounting in Business Administration at Yale University.
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Date Created: 06/17/15
Basic Accounting Principles Going Concern Assumption The going concern principle also known as continuing concern concept or continuity assumption means that a business entity will continue to operate inde nitely or at least for another twelve months Accrual Basis of Accounting The accrual method of accounting means that quotrevenue or income is recognized when earned regardless of when received and expenses are recognized when incurred regardless of when paidquot Accounting Entity Concept The accounting entity concept recognizes a speci c business enterprise as one accounting entity separate and distinct from the owners managers and employees of that business Time Period Periodicity The time period assumption also known as periodicity assumption means that the inde nite life of an enterprise is subdivided into time periods accounting periods which are usually of equal length for the purpose of preparing nancial reports on nancial position performance and cash ows Monetary Unit Assumption The monetary unit assumption has two characteristics quanti ability and stability of the currency Quantifiability means that records should be stated in terms of money usually in the currency of the country where the nancial statements are prepared Stability of the dollar or euro pound peso etc aka stable dollar concept means that the purchasing power of the said currency is stable or constant and that any insigni cant effect of in ation is ignored Matching Principle The matching concept means that expenses are recognized in the period the related income is earned and income is recognized in the period the related expenses are incurred In essence income is matched with expenses and vice versa Revenue Recognition Principle In accrual basis accounting revenue or income is recognized when earned regardless of when received It means that income is recorded when the service is fully performed or when sale occurs even if the amount is not yet collected Expense Recognition Principle Also under accrual basis accounting expenses are recognized when incurred regardless of when they are paid In other words expenses are recorded when used incurred even if they are not yet paid
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