Page 31 - Book-keeping for Secondary Schools Student’s Book Form One

Basic principles of Book-keeping

This is because doing so will reflect an end of each period, the performance of the
assumption that the assets are held for entity is measured by matching revenue
the purpose of being sold rather than for and expenses. If there was no uniformity
the purpose of being used in a business. in the period covered by expenses and
Reporting assets at market value would the one covered by revenue, then there
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be appropriate when the business is would not be any meaningful profit or
expected to be closed in the near future loss reported.
(That is, within the next 12 months) or the
business is no longer a going concern.
The historical cost concept makes this Exercise 2.1
possible by prescribing that assets should Imagine that you are starting a small
be reported at their historical cost unless business selling handmade crafts.
there are reasons to conclude that the Before you begin recording your
business is no longer a going concern. financial transactions, what are the
fundamental principles and concepts of
Going concern concept and the Book-keeping that you think you should
accounting period concept be aware of? Use three principles or
The going concern principle literally concepts to explain their functions in

assumes no end in the lifespan of a recording business transactions.
business. It means that one would have
to wait up to the end of the business to Summary
determine a profit or a loss. Because of This chapter, explored the fundamental
the need to know the performance of principles and concepts of Book-keeping,
the business, the life of the business is gaining a solid understanding of the
core concepts that form the backbone of
divided into uniform accounting periods financial record-keeping. The following
at the end of which financial statements is a summary of the key points in the
are prepared and presented. In this way, chapter:

the going concern principle is observed, (a) Double-entry system: The double-
but without affecting the ability of the entry system is the foundation of
business to measure its performance. Book-keeping, where every financial
transaction involves at least two
Accounting period concept and the accounts, completing a debit entry
matching principle and a credit entry. This system ensures

As already defined, the accounting period that the accounting equation (Assets
is reflected in the act of dividing the life = Liabilities + Equity) remains
of a business into a uniform length of balanced, promoting accuracy and
accounting periods. It is known that at the integrity to financial records.

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