30. The four main accounting principles for Financial Reporting established in SSAP 2 “Accounting Concepts” (1971) are:

A. Going Concern, Accruals, Consistency and Prudence

B. Relevance, Reliability, Comparability and Understandability

C. Going Concern, Relevance, Consistency and Comparability

D. Accruals, Prudence, Reliability and Understandability

Answer : A

Going Concern: The business will continue to trade for the foreseeable future
> Accruals: Also known as “matching”. Income and expenditure are recognised when they occur, not when cash moves
> Consistency: accounts are prepared in the same way year on year (or adjusted to allow comparison) and the same methods are used for example if cars are depreciated with the diminishing balance method, a new van would use the same method
> Prudence: Revenue (income) is only recognised when it legally occurs; expenditure or losses are recognised immediately. For example, if someone promises to buy something, the sale is not accounted for until the legal transfer. However if stock is known to be damaged or falls in value, the loss is accounted for immediately.
Other terms relate to principles of financial reporting. They are all words that you need to be familiar with!