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:
1. Explain clearly what is meant by: (/) the historical cost convention; (//) the going concern convention.
2. Does traditional financial accounting, using the historical cost convention, make the going concern convention unnecessary? Explain your answer fully.
3. 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)
