Terms Introduced in the Chapter

Every asset is recorded in the books at its purchase (historical) cost — including acquisition, transport, installation and making-ready costs — and not a …

The expenses incurred in an accounting period should be set against (matched with) the revenues earned in that same period, so that the correct prof …

Accounting should focus on material facts — information significant enough to influence a user's decision — while immaterial items may be …

Every transaction should be recorded on the basis of verifiable, documentary evidence, free from the personal bia …

Accounting policies and practices, once adopted, should be applied uniformly from one accounting period to the next so that res …

Every transaction has a two-fold effect and is recorded in at least two accounts, expressed by the accounting equation Assets = …

The policy of playing safe under uncertainty — anticipated losses are provided for while unrealised gains are ignored — so that profits and as …

The assumption that a business will continue its operations for an indefinite, foreseeable period and will not be liquidat …

The quality of accounting information that lets users make meaningful inter-firm and inter-period comparisons, achieved by applying uniform and cons …

All material and relevant facts about the financial performance and position of an enterprise must be fully and completely disclosed in the financial …

The rules, concepts and conventions generally accepted by the accounting profession as a guide for recording and reporting business transactions, so that financial statements are p …

Revenue is treated as earned/realised only when a legal right to receive it arises — when goods are sold or services rendered — not necessari …

The working rules and guidelines — principles, concepts and conventions — that direct how business transactions are recorded and reported …

The fixed span of time (normally one year) at the end of which financial statements are prepared to measure the profit or loss and the financial p …

Only those transactions and events that can be expressed in terms of money are recorded in the books, and they are recorded in monetary units r …

A fundamental assumption or basic idea underlying the theory and practice of financial accounting, acting as a broad working rule for al …

A destination-based indirect tax on the consumption of goods and services, levied at every stage of supply with credit for taxes paid at earlier stages; in India it has three c …