The Business Entity Concept
Money Measurement Concept
Going concern concept
Accrual basis concept
Materiality and aggregation concept
Concept on Prudence
Financial accounting has a number of conservative laws which have been considered over the years and all the possible identifiable rules are:
Business Entity Concept, Money Measurement Concept, Going concern Concept, Accrual basis of accounting concept, Consistency Concept, Materiality and aggregation concept, Prudence, Matching Principle and Dual Aspect 1. The Business Entity Concept
It is the customary where you strictly distinguish all the matters of any business from its owners ‘personal affairs. Practically it is difficult to distinguish shortly what is business and what is privet particularly in the case of partnership entities with limited companies. On the other hand it is a distinct legal difference between owner and business. Both of them differ to the extent of controlling proprietor’s effect upon an industry though in all other forms the owners’ personal transactions are not associated with the accounts of the business and the transactions. In regards accounting purposes it is not relevant and the business entity convention is applicable to all business.
Sohel has 6 cars in his garage he has hired for £6000 every month and has sets up a single – member accounting exercise using one car for the function. In the business entity concept, 1/6th or £1000 would be charged for the business as all the other 5 cars and £5000 value of rent will be spent in personal reason.
2. Money measurement.
Money measurements concepts are such transactions which could easily be counted, giving a financial worth which requires to be recorded in the books of account even though over a period of time the value of money changes. Money should not be compared during inflation
References: Glautier, M.W.E and Underdown, B. (2001) Accounting Theory and Practice, 7th Edition. London: Prentice Hall Dyson R.J. (2010) Accounting for non-accounting students, 8th Edition. London: Prentice Hall http://accounting-simplified.com/financial/concepts-and-principles/money-measurement.html#sthash.fuW0O9z5.dpuf