What are the 7 Accounting Principles?
Going Concern, Accrual accounting, Business entity, Materiality, Consistency, Prudence, Money measurement
What is going concern?
The assumption a business entity will continue operating for the foreseeable future
What is accrual accounting?
The idea that transactions are recognised when they occur
What is Business entity?
Transactions of a business are recorded separately to its owners
What is Materiality?
Information is material if it could influence decisions of its primary users
What is consistency
Refers to being consistent in methods and classifications
What is prudence?
Exercising caution in judgement e.g. not overstating assets
What is money measurement?
Transactions are only recorded in accounts if they have monetary value e.g. can’t record employee morale
What are the qualities of useful information?
Relevance and Faithful representation
What are enhancing qualitative characteristcs?
Comparability, Verifyable, Timeliness and Understanable
What are the fundamental ethical principles?
Integrity, Objectivity, Professional competence, Confidentiality and Professional behaviour.
What are the threats to ethical principles?
Self-interest, Self-review, Advocacy,
Familiarity and Intimidation
What are Books of Prime entry (BOPE)?
Where businesses record their initial transactions (day-to-day)
Where are the BOPE posted?
Ledgers or the general ledger
How does VAT on sales affect the amount a VAT registered business owes to HMRC?
Increased the amount owed
How does VAT on purchases affect the amount owed to HMRC?
Decreases the amount a business owes
What is the Accounting equation?
Assets - liabilities = capital
What is DEAD CLIC?
Debits increase expenses assets and drawings, Credits increase liabilities income and capital
What is the balancing figure?
The larger of the two values (Dr or Cr)
What is the concept of double-entry?
There is always and equal and opposite entry for an initial entry
What is a Non-Current Asset?
An asset held for purpose and used during a period longer than a year (think property, plant, equipment)
What is Capitalisation?
A business doesn’t record the acquisition of a NCA on the PNL but on the balance sheet and NCA register
Would a VAT registered business capitalise VAT?
No, can be claimed back
What is the straight line method for depreciating a NCA?
