INTRODUCTION TO FINANCIAL ACCOUNTING
SUPPLEMENTAL CONTINUOUS ASSESSMENT 1
Table of Contents
Business Entity Concept    3
Dual Aspect Concept    3
Money Measurement Concept    3
Historic Cost Concept    4
Going Concern Concept    4
Realisation Concept    4
Accrual Concept    4
References    6
Business Entity Concept
According to Schroeder, Clark and Cathey (2019), business Entity concept means that the owner of the business and the business entity is distinct for the purpose of recording transactions and accounting. In other words, the personal transaction of the owner of the business should not be merged with the transaction of the business entity. Both need to be accounted separately. There are multiple reasons for the same.
It is important for computing the accurate profitability, financial performance and financial position of the company. If the personal transactions of the owner are merged with the transactions of the entity then the correct picture of the entity will not be reflected. Further, the cash and the other assets infused by the owner in the business are accounted as capital and anything withdrawn by the owner is regarded as drawing. The assets and liabilities of the entity are distinct and separated from the asset and liabilities of the owner.
Dual Aspect Concept
As noted by Pratt (2016), Dual Aspect concept means that each transaction of the entity is recorded in two separate accounts. This is also called double entry system. For example, in every transaction, one account is debited and the other account is credited with the equal amount. This is the basic principle of accounting. In others words, every inflow of cash either increases liability or it decreases another asset or increases the income of the entity.
Similarly, every outflow of cash either decreases the asset or decreases the liability or it increases the expenses. These are some of the example of dual aspect concept, which holds true for every transactions. In dual aspect concept the total of assets is always equals to the aggregate of capital and liability. This is because every debit has equal credit.
Money Measurement Concept
In money measurement concept every transaction is recorded in the books of accounts in monetary terms, the transactions, which...