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Accounting Concepts Conclusion

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Transcript

Okay, congratulations, everyone, I'm completing section one of this course, we've now covered the key accounting concepts of accounting. And just to sum up, the first principle that we talked about was the accounting entity principle. This is about trading all transactions from a business's perspective, not from the shareholders perspective or other people's perspective, but treating that business entity as its own separate entity and therefore, always looking at transactions from the businesses perspective. Secondly, we looked at the period concept, the period concept looks at trading time in terms of chunking it into blocks of time, and that all transactions will be recorded into the relevant period that it relates. We then talked about the reliability principle that how and this is all about how transactions are actually measured. And that if you Rely on information out of a system or that comes from an external source that is more reliable, as opposed to coming up with numbers and having a guesstimate of what the amount should be.

And there's obviously going to be situations when using more reliable information is going to be the preferred way as opposed to using a guesstimate, which can still be used, but only in certain circumstances. A lot of this will be depending on who the stakeholders are, and the level of lock delete the nature of their information. Then we talked about the concept of relevance and understand that there's different stakeholders with different needs, and therefore, the way that they want the information presented will depend on who they are and the type of information that they need. We then talked about the composability concept and that this is all about apples with apples and that everything needs to be classified according to the correct definitions. And in the following lecture, we will be going into a lot of these definitions. And then finally, we talked about the cash reserves.

Accrual basis of accounting whereas cash is all about recording transactions when the cash is actually transacted. The accrual basis looks more from the perspective of when the actual revenues have been earned and when the costs have been incurred. And this is a much more complete perspective of the performance of the organization by using the accrual basis of accounting. Okay, and so in the upcoming section of the course, we'll be moving into a lot more depth around the accounting equation, and really go into that double entry, debit and credit side of understanding transaction so I look forward to seeing you there.

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