Accounting
Concepts
Four important
accounting concepts underpin the preparation of any set of accounts:
Going
Concern
|
Accountants
assume, unless there is evidence to the contrary, that a company is not insolvent (run out of cash)
 |
Consistency
|
Transactions
and valuation methods are treated the same way from year to year, or period
to period. Users of accounts can, therefore, make more meaningful comparisons
of financial performance from year to year. Where accounting policies are
changed, companies are required to disclose this fact and explain the impact
of any change.
 |
Prudence
|
Profits
are not recognised until a sale has been completed. In addition, a cautious
view is taken for future problems and costs of the business.
 |
Matching
(or "Accruals")
|
Income
should be properly "matched" with the expenses of a given
accounting period.
 |
