Accounting Principles
Presumes that a business enterprise has an existence separate from its owner's private affairs
Accounting Entity Concept
Measures the ability of a business to meet its short-term financial obligations.
Current Ratio
Assets that will be converted to cash within 12 months.
Current Assets
General journal entries made on balance day to match revenue and expenses.
Balance Day Adjustments
Divides the life off transactions into arbitrary time periods
Accounting Period Concept
Indicates the extent to which the owner has financed the business as opposed to borrowings.
Equity Ratio
Debts that will be paid in 12 months
Current Liabilities
Occurs when net sales exceed the cost of goods sold.
Gross Profit
Requires the recording of transactions at their original purchase price
Historical Cost Principle
Indicates the ability of a trading enterprise to generate a gross profit from sales of inventory.
Gross Profit Ratio
Items of value not expected to be liquidated in 12 months
Non-current Assets
Indicates the returns to the owner on the amount invested.
Return on Equity Ratio
Assumes that all transactions can be recorded in monetary terms
Monetary Principle
Indicates the ability of the enterprise to generate net profit from sales after expenses.
Net Profit Ratio
Revenues received in the current period but earned in a future period
Unearned Revenues
Records accounts receivable debts that are unlikely to be collected; a negative asset account.
Provision for Doubtful Debts
Accounting reports are prepared under the premise that the entity will continue to operate for the foreseeable future
Going-concern Principle
Measures how efficiently inventory is managed
Turnover of Inventories Ratio
An accounts receivable balance which will not be received
Bad Debts
General journal entries that reverse temporary balance day adjustments at the start of the period.
Reversing Entries