Accrual Concept

ACCRUALS CONCEPT The effects of transactions and other events are recognised when they occur (and not as cash or its equivalent is received or paid) and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate. ILLUSTRATION NO.1 Company A has received cash of $40,000 … Read more

Matching Concept

MATCHING CONCEPT A process in which expenses are recognised in the income statement on the basis of a direct association between the costs incurred and the earning of specific items of income. This process involves the simultaneous or combined recognition of revenues and expenses that result directly and jointly from the same transactions or other … Read more

What is Dual Aspect Principle or Concept/Double Entry System

DUAL ASPECT CONCEPT This dual aspect concept is also called Double Entry Methodology The key points are All transactions have two(2) dimensions                                 and this follows from the basic accounting equation which is: ASSETS= LIABILITIES + OWNERS’ EQUITY Assets are the resources owned by a business Liabilities are the rights of the creditors, which represent … Read more

What do we mean by Materiality Concept

Do you know the importance of having consistently practise the materiality concept or principle? Just imagine that the financial statements namely the Income statement and balance sheet are not based on the materiality concept or principles, every single cent of items omitted by the preparer will need to be reinstated or adjusted into the books … Read more

Historical Cost Accounting Concept

As discussed earlier, there are many cost accounting concepts. Below article detailed  the Historical Costing Accounting concept: HISTORICAL COST CONCEPT Assets, services recorded at price or sacrifice incurred to acquire them. This is called COST. Changes in value of non-monetary assets ignored. Exchange values are ignored Historical cost is the term usually applied. NOTES: This concept … Read more

Going Concern Concept

GOING CONCERN CONCEPT Business is continuing. Resources will be used for the future. Depreciation of fixed assets relies very heavily on this concept. Liquidation applies to the balance sheet if failure is probable. This concept assumes that the business entity will continue in business in the foreseeable future. As the intention is not to close … Read more

Prudence Or Conservative Concept

PRUDENCE OR CONSERVATISM CONCEPT OR PRINCIPLE · Recognize revenue only when they are reasonably certain · Recognize expenses as soon as they are reasonably possible NOTES: This concept basically does not encourage the anticipation of recognizing income when it is not certain. It prefers that any expenses that can be reasonably ascertain should be taken … Read more

Care about Your Family- This "family" poem

Family plays a very big role in our life. Sometimes, we tend to ignore our family. Most of us will not understand this until something happens to our loved one. Hopefully, this poem entitled Family will provoke us to balance your life with your family. Family (Author Unknown) I ran into a stranger as he … Read more

Ratio Analysis: Frequently Asked Questions

QUESTION NO 1: WHAT REALLY IS RATIO ANALYSIS? Ratio analysis involves methods of calculating and interpreting financial ratios to assess a firm’s financial condition and performance. QUESTION NO 2: WHO IS INTERESTED IN RATIO ANALYSIS? Since it’s able to assess a firm’s financial condition and performance, hence it is of Interest to all users group … Read more

Who Looks At The Financial Statements?

WHO ARE THE USERS OF THE FINANCIAL STATEMENTS? Equity Investor group: existing and potential shareholders; holders of convertibles, options or warrants Loan Creditor group: existing and potential holders of debentures and loan stock, provider of short term secured and unsecured loans and finances, including bankers Employee group : existing, potential and past employees Analyst-adviser group: … Read more