Money measurement concept: Only business transactions that can be expressed in terms of money are recorded in accounting, though records of other types of transactions may be kept separately.
Basic Accounting Principles Accounting assumptions and principles provide the bases in preparing, presenting and interpreting general-purpose financial statements. This also holds true for expenses as they are recorded when they were incurred, rather than when they were paid.
Going Concern — Also known as continuing concern concept or continuity assumption, it means that a business entity will continue to operate indefinitely. The American Institute of Certified Public Accountants defines accounting as: The art of recording, classifying, summarising in a significant manner and in terms of money, transactions and events which are, in part at least of financial character, and interpreting the results thereof.
This lesson takes you through the steps in the accounting cycle. Lesson 4 Here are some more sample transactions and their effect to the accounting equation.
In that case, the company might need to start considering the liquidation value of assets.