Accounting Theories

3. The business must report and adjust for losses or liabilities that are likely to incur, even though the losses or liabilities have not been confirmed yet
4. All expenses incurred in the accounting period must be matched against the income earned in the same accounting period
5. Life of the business can be divided into different regular intervals for presentation of financial statements
7. The business should be consistent in applying its accounting policy from period to period to ensure meaningful comparability of financial performance across the financial periods
8. Revenue should only be recognised when (or as) the goods are sold, or the services are provided to a customer
10. An item is considered material/significant if it affects the decision-making process of the business and therefore should be considered an asset
11. Revenue is recognised in the period when earned and expenses in the period when incurred regardless of whether money has been received or paid

1. All business transactions should be recorded at historical cost
2. Business and owner are treated as separate entities and all transactions are recorded from the business point of view
4. Only transactions that can be expressed in monetary terms can be recorded in the books
6. All business transactions recorded should be supported by reliable and verifiable supporting documents/evidences
9. Assumes that the business has an indefinite economic life and will continue to operate indefinitely