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ans Serif">THE ACCOUNTING ENTITY
The accounts deal with the affairs of a specific business enterprise. These affairs are separate from the private activities of the persons who are the owners of the business.

MONEY VALUES
Records are expressed in terms of money. As they are entered at the time the transactions occurred they are essentially historical. Money can be an imperfect means of management since the value of money and assets change.

CONTINUITY OF ACTIVITY
There is an assumption that the entity will continue its business operations.

HISTORICAL COST
Involves recording transactions at the amount of cash paid (or payable) at the time of acquisition.

ACCOUNTING PERIOD
Results are recorded in periods. An important task for an Accountant is to adjust the records so that the report on activities of a particular period is as accurate as possible. For instance, with regard to goods that have been brought and not yet sold, sales made but for which payment has not been made, payments made at balance date.

ACCRUAL BASIS
There are two methods in the measurement of net profit- the cash basis and the accrual basis of profit measurement.

• ans Serif">Under the cash basis of accounting, revenues are recorded in the period in which cash is received and expenses are recorded in the period in which cash is paid. In this system, net profit is the excess of cash inflows of revenues over cash outflows for expenses.
• ans Serif">Under the accrual basis of accounting, revenue is recognised in the period in which a business sells its goods and services, including amounts unpaid by debtors at period end. Expenses are the costs incurred in the accounting period, including amounts unpaid to creditors at period end.
• ans Serif">Generally the accrual basis is used, as this basis of profit measurement allows more accurate profits to be recorded.

ans Serif">MATCHING
Requires that all expenses incurred for a particular accounting period are matched accurately with all revenues earned for that period. This concept is in line with the accrual basis of measurement in that it tries to ensure more accurate recording of profits made by the organization. Therefore, balance date adjustments like depreciation, expenses accrued, income due, deferred revenue and prepaid expenses are very important considerations at the end of the accounting period.

CONSISTENCY
Using consistent policies and procedures from one period to the next. This is especially important in accounting reports so that reports for one period may be compared with those for another.

CAUTION
An Accountant tends to be cautious in the judgements and estimates that are necessary to prepare accounts. For instance, he makes provision for possible losses that may occur but he would refrain from taking into account profits that have not been actually realised. He considers that it is better to guard against overstating profit.

DISCLOSURE
Disclosure is providing information that will enable a proper appraisal of the situation to be made and appropriate decisions taken. Relevant facts must be stated fully and clearly, unusual circumstances noted, and additional notes given to achieve this.