1. Prudence Concept (Conservatism)

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• Profits and Assets should not be overstated, while

• Losses and Liabilities should not be understated

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Eg. Calculation of Allowance for impairment on Trade Receivables/Valuation of inventory at lower of cost or Net Realisable Value/ Depreciation & accumulated depreciation

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2.  Going Concern

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• Business is assumed to operate indefinitely (a very long time)

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3. Objectivity

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• All transactions must be supported by documentary evidence or source documents

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Eg. Invoice, Credit note, Debit note

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4. Historical Cost

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• All Non-Current Assets are to be recorded at the original cost price

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5. Consistency

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• The same accounting method should be applied for each accounting period for the same business

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Eg. Reducing-balance method or straight-line method to calculate depreciation

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6. Accounting Entity/ Separate Entity Concept

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• The business and owner are considered as two separate and different entities

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Eg. Drawings & Capital

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7. Accounting Period

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• Life of a business is divided into many fixed periods of time for the preparation of financial reports

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Eg. 4, 6 or 12 months. For eg, 12 months for accounting period beginning 1 January 2018 will end on 31 December 2018 (if you start on 1 January you count this month as one month too)

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8. Accrual

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• All expenses incurred and all income earned in the year have to be recorded regardless whether they have been paid or received

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9. Matching principle

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• All expenses incurred must match against all income earned in the same accounting period to derive an accurate profit for the year

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10. Monetary measurement

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• Only transactions that can be expressed in monetary terms are recorded

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Eg. Work experience cannot be recorded in accounts

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11. Materiality

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• Only items of significant value are to be treated as assets, otherwise, they are considered as expenses

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Eg. Stationery

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12. Realisation

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• Income (including sales) should be recorded as earned in the period in which goods or services are provided to customers by the business

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13. Duality

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• Each transaction affects a business in two different ways

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Eg. Double entry

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