Page 23 - Book-keeping for Secondary Schools Student’s Book Form One

Basic principles of Book-keeping

terms. Most countries would require that its liabilities, and fulfil its commitments
financial statements are presented in their in the normal course of operations. As a
local currency, for example, Tanzanian result, assets are generally recorded at their
shillings (TZS). historical cost and are not immediately
adjusted to their liquidation or forced-sale
The monetary measurement principle states values, unless evidence suggests that it will
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that only transactions or events that can cease to operate in the near future (within
be expressed in monetary terms should be the next 12 months).
included in the accounting records. This
principle implies that only measurable and The going concern principle is significant in

quantifiable economic events should be assessing the financial health and viability
recognised and reported in the financial of a business. Financial statements prepared
statements. Items that can not be quantified using this principle provide information
in monetary terms are not recorded in to users about the enterprise’s ability to
financial statements. This is because they meet its financial obligations, continue
lack a reliable monetary value. For example, operations, and generate profits in the long
the skills of employees and reputation of term. However, if circumstances arise that

an enterprise. This principle along with raise doubts about the business’s ability
other accounting principles and concepts, to continue as a going concern, such as
provide a framework for preparing financial significant financial difficulties or legal
statements that are comparable. It ensures issues, the going concern principle may
that financial information is recorded, be questioned. In such cases, additional
measured, and reported consistently, disclosures or adjustments may be required
allowing for meaningful analysis and to reflect the potential impact on the financial
decision-making. statements.

Going concern principle The going concern principle ensures that
The going concern principle, also known as financial statements reflect the assumption
the continuity assumption, assumes that a of business continuity. It also allows
business will continue its operations beyond stakeholders to make informed decisions
a reasonable length of time it will not be based on the assumption that the enterprise
forced to liquidate or cease operations in the will continue its operations in the foreseeable
foreseeable future. This principle underlies future.
the preparation of financial statements and
the basis for valuing assets and liabilities. Time period principle
The going concern principle assumes that The time period principle, also known as
the business can realise its assets, settle
the periodicity concept, suggests that the

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