← Accounting concepts for a New Zealand reporting entity
Reading the notation
A fixed set of definitions and characteristics carries every paper — get them precise, since a definition alone caps below Excellence and the company's own figure must be attached to each one.📖 Terms used in accounting concepts
9 termsCover the right column and check you can say what each one means.
- Asset
- A resource controlled by the entity, as a result of a past event, from which future economic benefits are expected to flow to the entity.
- Liability
- A present obligation of the entity, arising from a past event, whose settlement is expected to result in an outflow of economic benefits.
- Income / expense
- Increases (income) or decreases (expense) in economic benefits during the period, other than transactions with owners.
- Recognition criteria
- The benefit or outflow must be PROBABLE, and the amount must be measurable faithfully/reliably — before an item that meets a definition goes into the statements.
- Relevance
- Capable of making a difference to a decision — has predictive value, confirmatory value, or is material.
- Faithful representation
- Complete, neutral, and free from error — the figures depict what actually happened.
- Materiality
- Information is material if omitting or misstating it could influence a user's decision — entity-specific, with no universal threshold.
- Going concern
- The assumption that the entity will keep operating for the foreseeable future.
- Accrual basis
- Income and expenses are recognised in the period they are earned or incurred, not the period the cash moves.
Before writing anything
- Skim for the recurring skill signals: a definition-and-recognition part, a qualitative-characteristics part, ESG evidence, a subsequent event, or a capital-vs-revenue call — each has its own checklist below.