Solution 13.6

Recognition in financial statements

Chapter 5 of the statement of principles focuses on what is required to recognise a transaction that creates or increases assets and liabilities, gains and losses. In order to recognise, and thus include in the accounts, any transaction that affects any of the elements of financial statements, there must be evidence of its existence so that it can be measured reliably as a monetary amount with sufficient reliability. The relevant accounting concepts related to recognition in financial statements are the;

1. Money measurement concept

2. Realisation concept