Accounting Principles and Concepts

Depreciation convention

Conservatism convention

Consistency convention

Full disclosure convention

$33,000

$25,000

$17,000

$8,000

Ordinary annuity

Special annuity

Annuity due

Delayed perpetuity

The concept requires proper care when calculating revenue.

The concept stresses that revenues should only be recorded if there is reasonable certainty about their realization.

The concept describes the problems that may arise in the calculation of incomes and expenses.

The concept explains that the comparison of incomes and expenses for a particular period can give the period’s net result.

Full disclosure of all material facts that can affect the financial statement.

That profit should be realized.

Matching of incomes and expenses for a particular period.

The business to avoid being dissolved in the near future.

The revenues of a particular period must match with the expenses of that period.

This concept also required allocation of cost on different accounting periods.

Revenues should only be recorded if there is reasonable certainty about its realization.

The comparison of incomes and expenses of a period gives the net profit or loss for that particular period.

Efficiency and effectiveness of operations

Controls related to the reliability of financial reporting

Controls over classes of transactions

Auditors are equally concerned about each of the issues

Business and owner are treated as separate entities

Personal affairs of the owner should not be considered

Business should not be dissolved in the near future

This concept is followed in all types of businesses

Assets = Liabilities – Stockholder’s equity

Assets + Liabilities = Stockholder’s equity

Assets + Stockholder’s equity = Liabilities

Assets = Liabilities + Stockholder’s equity

ICQs and walkthrough tests

ICQs and judgment samples

ICQs and random samples

ICQs and ICEC