(i) Accounting concepts are accounting rules or policies that are used when preparing financial statements. When accounting concepts are used, a ‘true and fair’ view of the business is shown. [2]
(ii) Fundamental accounting concepts (a) Accruals (b) Going Concern (c) Consistency
(d) Prudence [1+1]
(iii) The Accruals Concept is to do with expenses and revenues. It means that all expenses and revenues incurred in the 2013 accounting period must be included in the accounts, irrespective of whether they are paid or not.
Example: Bank Balance
Light and Heat 6,500 P & L
500 Drawings 7,000
P & L figure includes: Bank
add Electricity due less Drawings
6,500 500
7,000
(1,400) 5,600
(even though the electricity has not been paid for yet. [4] )
