ACCT1101 Lecture Notes - Lecture 19: Business Record, Historical Cost, Unit
Document Summary
Basic concepts: accounting process is based on several concepts/conventions, used for business decisions, appreciate limitations (+ usefulness) of accounting information. 5 basic accounting concepts: entity concept, transactions, source documents, monetary unit concept, historical cost concept. Entity concept: businesses can take many forms, e. g sole partnership, corporations, partnerships. Irrespective of business form, the accounting system must distinguish between the business & its owner: entity concepts, an (accounting) entity is considered separate (for accounting purposes) from its owners and from any other business. If an entrepreneur owns several businesses then each of these business will maintain separate accounting records and be regarded as separate entities for reporting purposes: a (cid:271)usiness owner"s personal transa(cid:272)tions are not re(cid:272)orded in the (cid:271)usiness" accounting system. Transactions: accounting process usually begins with a business transaction, transaction = exchange of property/service with another entity, e. g purchase of inventory for cash; payment of sales staff salaries. Businesses are involved in numerous transactions every day.
