1
What is meant by the ‘money measurement concept’?
2
Explain the concept of prudence in relation to the recognition of profits and losses.
3
Explain the term ‘materiality’ as it is used in accounting.
4
‘The historical cost convention looks backwards but the going concern convention looks
forwards.’
Required
:
(a) Explain clearly what is meant by:
(i
) the historical cost convention;
(ii
) the going concern convention.
(b) Does traditional financial accounting, using the historical cost convention, make the going concern
convention unnecessary? Explain your answer fully.
(c) Which do you think a shareholder is likely to find more useful – a report on the past or an
estimate of the future? Why?
(Association of Chartered Certified Accountants)