The fundamental accounting concepts and the role of control accounts and the bank reconciliation.
Accounts are prepared using agreed concepts so they are reliable and comparable.
Key accounting concepts
- Business entity: the business is separate from its owner.
- Going concern: the business will continue for the foreseeable future.
- Accruals (matching): record income and expenses when they occur, not when cash moves.
- Prudence: do not overstate profit or assets; recognise likely losses early.
- Consistency: use the same methods each period so figures compare.
- Materiality: only significant items need separate treatment.
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