Ans to the question number: 2

1. Cost Principle: The cost principle is an accounting principle

that records assets at their respective cash amounts at the time
the asset was purchased or acquired. For example, when a
retailer purchases inventory from a vendor, it records the
purchase at the cash price that was actually paid. The cost is
equal to the amount paid in the transaction.

2. Economic Entity Assumption: The economic entity

assumption is an accounting principle that separates the
transactions carried out by the business from its owner. For
example, Alam owns a car shop. On March 12, Mark bought a
bike for himself. This event is Mark's personal cost and not
related to the business. So, this event should be kept separate
from the business.

3. Monetary Unit Assumption: The monetary unit concept is an

accounting principle that assumes business transactions or
events can be measured and expressed in terms of monetary
units and the monetary units are stable and dependable. For
instance, if a company’s quality of service or product reduces,
under monetary unit assumption this event won’t be recorded
even though the information is important. It is because cannot
be measured in monetary terms.
4. Going Concern: The going concern concept of accounting
implies that the business entity will continue its operations in the
future and will not liquidate or be forced to discontinue
operations due to any reason. For instance, a state-owned
company is in a tough financial situation and is struggling to pay
its debt. The government gives the company a bailout and
guarantees all payments to its creditors. The state-owned
company is a going concern despite its poor financial position.

5. Periodicity: Periodicity is the accounting concept used to

prepare and present financial statements into the artificial period
of time as required by internal management, shareholders or
investors. For example, if the reporting period for the current
year is set at calendar months, then the same periods should be
used in the next year, so that the results of the two years can
compared on a month-to-month basis

6. Revenue Recognition Principle: The revenue recognition

principle states that revenue should be recognized and recorded
when it is realized or realizable and when it is earned. For
example, John’s Dry-Cleaning Company cleaned garments on
July 31, but customers did not claim and pay for their clothes
until the first week of September. John should record the
revenue when the services were performed rather than in July
when it received the cash.
7. Matching Concept: The matching concept is a founding
principle of accounting. It illustrates that an expense must be
recorded in the same period as the income to which it is related.
For example, if a business pays 10% commissions to sales
representatives at the end of each month. If the company has
$50,000 in sales in the month of December, the company will
pay the commission of $5,000 next January. According to the
matching concept, the commission expense is recorded in the
December income statement.

8. Accrual Basis of Accounting: Accrual accounting is a method

of accounting where revenues and expenses are recorded when
they are earned, regardless of when the money is actually
received or paid. For example, you would record revenue when
a project is complete, rather than when you get paid.

9. Dual Aspect of Accounting: Dual aspect concept states that

since every transaction has a dual effect, the accounting records
must reflect the same to show the accurate movement of funds.
For instance, a buyer pays cash in return for a purchased item
while the seller gains cash in return for the sold item. This
makes a transaction dual in nature, affecting two accounts
simultaneously and hence it should be registered likewise.