Accrual concept can be identify as the amount of money are earned or incurred, not received or

paid in the end of accounting period. For example, with Shoebox, the accrual revenue are
recorded on the date of sale and it must be included in the revenue for the year ending 31 March
2014
Information is material if its omission or misstatement could influence the economic decisions
of users taken on the basis of the financial statements (IASB Framework). (Nordmeyer, n.d) In
other words, all such information is likely to affect the decisions of users of financial statements
are the property of the document and the information is called material.
Applying for Shoebox, assuming that in an accounting term, the miscellaneous expenses of
Shoebox only account on 0.1% of net income. The materiality concept states that this loss is
immaterial to the overall financial picture of the company because it is too small and there is no
need to reclassify the expenses in it
1.2.3 Prudence
The inclusion of a degree of caution under condition of uncertainty
1.2.4 Business entity
This concept assumes that business enterprise and its owners are two separate independent entity.
It means that business and personal transactions should be treated as a separate entity from its
owners.

) For instance, if the owner invest money into the business, it was noted as liability of the
business to the owner, not personal expense. Likewise, when the owner take away the money or
goods business for personal use, it is not recorded as business expenses
1.2.5 Consistency
The same accounting policy should be used from one accounting period to the next in order to
compare profit or losses etc. I
Applying for Shoebox, if the company changed financial method for valuing inventory every
single year, investors and creditors wouldn't be able to compare the company's financial
performance or financial position year after year. They will have to recalculate everything to
make the financial statements comparable with each other. Thus, the financial method which is
used need the same year by year.
1.2.6 Going concern
An entity which will continue to operate in the foreseeable future without the intention nor the
need to liquidate or curtail materially the scale of its operation. Simply stated, it means that every
business entity has continuity of life.
It also the basis for the definition that depreciation is charged on the fixed asset. Only a part of
the value of a fixed asset will be treated as expense in the year of purchase and the remaining
balance is shown as an asset