 | Term | Definition |
| |
The Accounting Entity |
This is the idea that the business is a separate entity from its owner (and all other entities). |
| |
Monetary Measurement |
This is the idea that all transactions, assets, liabilities, expenses, income and equity are recorded in dollar terms (using the same currency). |
| |
Going Concern |
This is the idea that the business will continue its present operations into the foreseeable future (the business has no plans to close down). |
| |
Historical Cost |
This is the idea that we record the value of assets at their purchase (or original cost). |
| |
Period Reporting |
This is the idea that the economic activity of a business (that is a going concern) is divided into separate equal periods of time (month, six months, one year). |
| |
Accrual Basis |
This is the idea that the effects of transactions and other events are reported in the period in which they occurred. |
| |
Assets |
Resources presently controlled by the business as a result of a past transaction from which future economic benefits are expected to flow into the business. |
| |
Current Assets |
Assets that are either cash or likely to be turned into cash in the next 12 months. |
| |
Non-current Assets |
Assets that are NOT expected to be converted into cash in the next 12 months. |
| |
Investment Assets |
Money which has been invested long-term which will provide future income |
| |
Intangible Assets |
Non-physical assets that will provide a future economic benefit for the business |
| |
Property, Plant & Equipment |
Assets with long term use which will provide future economic benefit for more than one year |
| |
Liabilities |
Present obligations of the business as a result of a past transaction which are expected to result in an outflow of future economic benefits from the business. |
| |
Current Liabilities |
Amounts that have to be repaid in the next 12 months |
| |
Non-Current Liabilities |
Amounts that do not have to be repaid (in full) in the next 12 months |
| |
Equity |
The amount owed by the business to the owner |
| |
Revenues |
Increases in economic benefits which either increase assets or decreases liabilities that result in an increase in equity other than the owner’s contributions |
| |
Expenses |
Decreases in economic benefits which either decrease assets or increases liabilities that result in a decrease in equity other than the owner’s drawings |
| |
Revenue Expenditure |
Spending by the business on its day-to-day operations to keep it and its assets going. |
| |
Capital Expenditure |
Spending by the business to buy an asset and to get the asset into the business ready to use. |
| |
Distribution Costs |
Those expenses that are paid while selling the good or service or getting it to customers. |
| |
Administration Expenses |
Those expenses that are paid while organising the business operations. |
| |
Financial Costs |
Those expenses that are paid while getting money into the business (loans). |
