Historical cost principle: According to this principle an asset of a business must be recorded in the accounting records at the price paid to acquire them at the time of its acquisition, i.e. original cost.
Materiality principle: This principle requires that the items or events having insignificant economic effect or not being relevant to the user’s need not be disclosed. In other words, only significant items should be considered when preparing financial statements.
A scatter graph technique is the method of separating semi-variable costs into fixed and variable elements. This method is also known as the regression line method. This method is based on past data, but it takes into account all data as compared to the high low method which considers only the highest and lowest items in the given data. This article provides five steps you should follow when segregating or separating semi-variable cost by using a scatter graph technique
The basic assumptions of accounting are like foundation pillars on which the structure of accounting is based.
The following are four basic assumptions of accounting
Business entity: According to this assumption, a business is treated as a separate entity and distinct from its owners. Its books of account should record only those transactions which belong only to the firm and should not include personal transactions and activities of the owner. The personal resources of the proprietor(s) affect the accounting records of business only when there is an introduction of new capital into the business or drawings are taken out of it by them.