Chapter 1 - The Nature And Role Of Accounting In Small Business

Front 1

Comparability

Back 1

Reports should be able to be compared over time through the use of consistent accounting procedures.

Front 2

Understandability

Back 2

Reports should be presented in a manner that makes it easy for the user to comprehend their meaning.

Front 3

Reliability

Back 3

Reports should contain information verified by source document evidence so that it is free from bias.

Front 4

Relevance

Back 4

Reports should include all information which is useful for decision-making.

Front 5

Qualitative Characteristics

Back 5

The qualities of the information in accounting reports.

Front 6

Accounting

Back 6

The collection, recording and reporting of financial information to assist business owners in decision-making.

Front 7

Financial Data

Back 7

Raw facts and figures upon which financial information is based.

Front 8

Financial Information

Back 8

Financial data which has been sorted, classified and summarised into a more usable and understandable form.

Front 9

Transaction

Back 9

An agreement between two parties to exchange goods and services for payment.

Front 10

Source Documents

Back 10

The pieces of paper or electronic documents that provide both the evidence that a transaction has occurred, and the details of the transaction itself.

Front 11

Recording

Back 11

Sorting, classifying and summarising the information contained in the source documents so that it is more usable.

Front 12

Reporting

Back 12

The preparation of financial statements that communicate financial information to the owner.

Front 13

Advice

Back 13

The provision to the owner of a range of options appropriate to their aims/objectives, and recommendations as to their suitability.

Front 14

Accounting Principles

Back 14

The generally accepted rules which govern the way accounting information is recorded.

Front 15

Entity Principle

Back 15

The business is separate from the owner and other entities, and its records should be kept on this basis.

Front 16

Going Concern Principle

Back 16

The life of the business is assumed to be continuous, and its records are kept on that basis.

Front 17

Reporting Period Principle

Back 17

The life of the business must be divided into 'periods' of time to allow reports to be prepared, and the accounting records should reflect the reporting period in which a transaction occurs.

Front 18

Historical Cost Principle

Back 18

Transactions should be recorded at their original purchase price, as this value is verifiable by source document evidence.

Front 19

Consistency Principle

Back 19

The business should use the same accounting methods to allow for the comparison of reports from one period to the next.

Front 20

Monetary Unit Principle

Back 20

All items must be recorded and reported in the currency of the country of location where the reports are being prepared.

Front 21

Conservatism Principle

Back 21

Losses should be recorded when probable, but gains only when certain so that liabilities and expenses are not understated and assets and revenues are not overstated.