Accounting principles
- Business entity — the financial matters of the business are recorded separately from its owner, as they are different legal persons.
- Duality — every transaction is recorded in two accounts, as a debit and a credit (the double entry system).
- Matching — income and expenses are recorded for the current financial year whether or not they have been paid (add accruals, deduct prepayments).
- Materiality — only information significant to the company's decision-making needs to be recorded.
- Money measurement — only information that can be expressed in monetary value is recorded.
- Prudence — underestimate assets and revenues; overestimate liabilities and expenses.
- Consistency — calculation methods should not change without good reason.
- Realisation — revenue is only recognised when the exchange of goods or services is complete.
- Historic cost — assets are recorded at their cost when purchased, not their current value.
- Going concern — the business is assumed to keep trading for the foreseeable future, with no intention to close down.