A-AS Level (CIE) Accounting Paper-2: Specimen Questions with Answers 11 - 11 of 53

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Question 11


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Explain any two principles of accounting.


  • The revenue realization concept: While the conservatism concept states whether revenue should be recognized, the concept of realization talks about what revenue should be recognized only to the tune of which it is certainly realizable. Thus, merge getting an order from the customer won՚t make it eligible to recognize as revenue. The reasonable certainty of realizing the money will come only when the goods ordered are supplied to the customer and he is billed. This concept ensures that income is earned or unrealized will not be considered as revenue and the firms will not inflate profits.
  • Dual Aspect Concept: the assets represent economic resources of the business, whereas the claims of various parties on business are called obligations. The obligations could be towards owners (called as owner՚s equity) and towards parties other than the owners (called as liability) . When a business transaction happens, it will involve use of one or the other resources of the business to create settle one or more obligations.

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