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followed, and that the common rules and procedures are complied with. This observance of
accounting principles has helped developed a widely understood grammar and vocabulary for
recording financial statements. There may be minor differences in the application of accounting
rules and procedures depending on the accountant. For example, two accountants may choose two
equally correct methods for recording a particular transaction based on their own professional
judgement and knowledge.

Accounting principles are accepted as such if they are:

− Objective;

− Usable in practical situations;

− Reliable;

− Feasible (they can be applied without incurring high costs);

− Comprehensible to those with a basic knowledge of finance.

2.1.2. Accounting Concepts

− Business entity concept: A business and its owner should be treated separately as far as
their financial transactions are concerned;

− Money measurement concept: Only business transactions that can be expressed in terms of
money are recorded in accounting, though records of other types of transactions may be

kept separately;

− Dual aspect concept: For every credit, a corresponding debit is made. The recording of a
transaction is complete only with this dual aspect;

− Going concern concept: In accounting, a business is expected to continue for a fairly long
time and carry out its commitments and obligations. This assumes that the business will
not be forced to stop functioning and liquidate its assets at “fire-sale” prices;

− Cost concept: The fixed assets of a business are recorded on the basis of their original cost
in the first year of accounting. Subsequently, these assets are recorded minus depreciation.
No rise or fall in market price is taken into account. The concept applies only to fixed
assets;

Project 2019-1-BG01-KA204_062299
The content of this material does not necessary reflect the official position of the European Union.