FUNDAMENTAL CONCEPTS OF ACCOUNTING
This accounting concept requires a business to keep its financial records separate from the personal finances of its owner.
(What is the Entity Concept?)
This type of asset can be converted into cash within 12 months after the reporting period.
(What is a current asset?)
This book of accounts is used to record all financial transactions before they are summarized in the trial balance.
(What is a ledger?)
This principle divides financial reporting into specific time intervals, such as months or years.
(What is the Periodicity Concept?)
A company’s financial obligations that must be settled within 12 months are classified as these.
(What are current liabilities?)
Expenses that have been incurred but not yet paid are classified under this type of adjusting journal entry.
(What are accrued expenses?)
Under this assumption, inflation is ignored, and the value of money remains stable over time.
(What is the Stable Monetary Unit Concept?)
This term refers to the residual interest in a company’s assets after deducting all liabilities.
(What is equity?)
This type of income is recorded when a business has earned revenue but has not yet received cash payment from the customer.
(What is accrued income?)
This concept assumes that a business will continue to operate indefinitely unless there is evidence to the contrary.
(What is the Going Concern Concept?)
This category of liabilities includes long-term obligations such as loans payable.
(What are non-current liabilities?)
Under the prepayment category, this method initially records an advanced payment as an expense rather than an asset.
(What is the expense method?)
These accounts reduce the balance of related asset accounts, such as accumulated depreciation offsetting property, plant, and equipment.
(What are contra assets?)
The formula for annual depreciation under the straight-line method is this.
(What is (Cost of PPE - Salvage