Period
Financial activities are recorded and reported on for a particular period of time
Accrual Basis
Recording revenue when earned, and expenses when incurred
Going Concern
A business will continue to operate, and isn’t expected to end in the near future
Entity
Business must keep its records separate from its owner
Timeliness
Information is to be provided to users as quickly as possible so that it remains useful for decision making
Under-standability
Financial information should be presented clearly and concisely, so that users can easily understand it
Relevance
Information to be useful in helping users make decisions
Faithful Representation
Financial information must accurately reflect economic events
Comparability
Ability to compare similar types of accounting information effectively with other entities, or over different reporting periods
Verifiability
Information is to be supported by evidence that can be used to check its accuracy
Asset
A present economic resource controlled by the entity as a result of past events
e.g cash at bank, inventory, vehicle, accounts receivable
Liabilities
A present obligation of the entity to transfer an economic resource as a result of past events
e.g loan, accounts payable
Revenue
Increases in assets or decreases in liabilities that result in increases in owner’s equity, other than those relating to contributions from the owner
e.g cash sales, credit sales
Expense
Decreases in assets or increases in liabilities that result in a decrease in owner’s equity, other than those relating to distributions to the owner
e.g wages, rent, electricity, advertising
Owner’s Equity
The residual interest in the assets of the entity after deducting all its liabilities
e.g capital, drawings, capital contributions