IGCSE Accounting: Accounting Concepts and Modern Practice — Revision Notes

Syllabus edition note. This resource follows the Cambridge IGCSE Accounting 0452 syllabus for exams in 2027, 2028 and 2029 (version 1), first examined in the March 2027 series in India and the June 2027 series elsewhere. If you sit 0452 in November 2026, you sit the 2026 syllabus (version 2), which differs: Paper 1 has 35 multiple-choice marks in 1 hour 15 minutes, not 40 marks in 1 hour 30 minutes; Topic 7 is “Accounting principles and policies”, without 7.2 Ethical considerations or 7.3 Technology and sustainability; 4.4 is “Irrecoverable debts and provision for doubtful debts”; income statements are named instead of statements of profit or loss; three-column running balance accounts are not required; Clubs and societies is 5.4 and Manufacturing accounts 5.5; and 6.3 is “Inter-firm comparison”. For this topic, the 2026 syllabus calls the same ten items accounting principles, and its 7.2 is Accounting policies (the influence of international accounting standards and the objectives of comparability, relevance, reliability and understandability), which the 2027-2029 syllabus removes. If you sit in November 2026, work from the 2026 syllabus on the Cambridge International website.

Condensed for the final weeks. For the full explanation, use the Accounting Concepts and Modern Practice study guide. Most applications link back to Topic 4 (Accounting Procedures) and Topic 5 (Preparation of Financial Statements).

The core question this topic answers

Why are the records kept the way they are, by whom, and how? 7.1 gives the reasons behind the entries, 7.2 the standards of the people making them, and 7.3 the tools used to keep and store them. 7.2 and 7.3 are new in the 2027-2029 syllabus.

7.1 Accounting concepts — meaning plus application

Concept	Meaning in one line	Application to learn
Business entity	Business is separate from its owner	Owner’s goods taken and private expenses paid = drawings
Consistency	Same method used period after period	Keep the same depreciation method; don’t switch to change profit
Duality	Every transaction has two equal aspects	Debit and credit of equal value; accounting equation
Going concern	Business will continue for the foreseeable future	Non-current assets at cost less depreciation, not forced-sale value
Historic cost	Assets recorded at original cost	Rise in market value of land not recorded
Matching / accruals	Revenue and costs in the period they relate to	Accruals (other payables), prepayments (other receivables), depreciation
Materiality	Small items need not be treated precisely	Cheap long-lasting item (e.g. $25 waste bin) charged as an expense
Money measurement	Only items measurable in money are recorded	Staff skill and morale not recorded
Prudence	Do not overstate profit or assets; recognise expected losses	Allowance for irrecoverable debts; inventory at lower of cost and NRV
Realisation	Revenue when goods/services pass and the customer accepts liability to pay	Order taken now, goods delivered next year = next year’s revenue

Answer pattern: name the concept → what it means → what it requires in this business’s records → the effect on profit or assets.

7.2 Ethical considerations

Need for a framework: others rely on accounting information they cannot check; accountants face pressure (higher profit for a loan, lower for tax) and see confidential data. A framework sets the standard in advance.

Principle	Meaning	Example
Integrity	Straightforward and honest	Not recording fictitious sales or hiding liabilities
Objectivity	No bias, conflict of interest or undue influence	Owner’s pressure must not change the allowance for irrecoverable debts
Professional competence and due care	Keep knowledge up to date; work carefully	Check depreciation and accruals before issuing statements
Confidentiality	Don’t disclose or misuse work information without authority or a duty to	Don’t discuss a customer’s debts or staff wages outside work
Professional behaviour	Comply with laws and regulations; don’t discredit the profession	Don’t help an owner evade tax

Significance: owners, investors, banks and lenders, suppliers, employees and governments / tax authorities (6.4, Analysis and Interpretation) decide using the figures. Unethical figures lead to bad loans, unpaid suppliers, lost jobs, lost tax revenue and lost trust in financial information.

7.3 Technology and sustainability

• Digital applications can hold all or part of the records: automatic double entry, totals, control accounts and trial balance; faster and fewer arithmetic errors, but cost, training, system dependence and input errors carried through.
• Store safely: complete, accurate, available, protected from loss and unauthorised access.
• Store sustainably: less paper and printing, no needless duplicate copies, responsible disposal of old devices after securely removing data, storage that stays usable as long as records are needed.
• Risks of not doing so: data lost (fire, flood, theft, failure, deletion); hacking or fraud; confidential data exposed; penalties; cost of rebuilding records; reputational damage; waste.

Storage	Advantages	Disadvantages
Manual	Cheap; no power/internet; cannot be hacked	Bulky; fire, flood, theft; slow to search; hard to back up; paper
Data storage devices	Large capacity; fast; no internet; physical control	Lost or stolen; can fail; back-ups needed elsewhere; outdated; e-waste
Cloud services	Access anywhere; provider back-ups; safe from local fire/theft	Needs internet; ongoing cost; depends on provider; third party holds data
Other digital services	Records created automatically; less paper; searchable	Scattered; depends on each service; may be kept for a limited time only

Note (7.3): “Candidates do not need to have knowledge of or access to specific accounting software packages or programs.”

Worked example: concept, correction, figure

Draft profit for the year $48,000. Adjust:

Draft profit for the year                                48,000
Goods taken by owner, no entry (business entity)           +600
Owner's private electricity in expenses (entity)           +400
Rent 5,400 for 6 months from 1 Oct; 3 months prepaid
  5,400 x 3/6 = 2,700 (matching)                         +2,700
Wages accrued (matching/accruals)                          -750
Inventory item cost 1,100; NRV 700 - 100 = 600
  write down 1,100 - 600 = 500 (prudence)                  -500
Sale recorded, goods delivered next year (realisation)   -2,500
Allowance 12,000 x 5% = 600; b/f 450
  increase 600 - 450 = 150 (prudence)                      -150
$25 waste bin expensed (materiality)                          0
Corrected profit for the year                            47,800

48,000 + 600 + 400 + 2,700 − 750 − 500 − 2,500 − 150 = 47,800.

Exam traps

• Defining a concept without applying it to the figures given.
• Mixing up matching (which period) and realisation (when revenue is earned at all).
• Saying prudence means understating profit — it means not overstating it.
• Treating materiality as permission to ignore errors.
• Confusing integrity (honesty) with objectivity (freedom from bias and pressure).
• Discussing storage with advantages only, or naming software products.
• Answering with the 2026 syllabus’s 7.2 Accounting policies content (see the edition note), which is not part of 7.1–7.3 for 2027-2029.

Self-test

1. Which concept explains why an owner’s private expenses paid by the business are recorded as drawings?
2. Name two applications of the prudence concept.
3. Why does the going concern concept mean non-current assets are shown at cost less depreciation?
4. A $15 stapler is charged as an expense rather than depreciated. Which concept allows this?
5. Name the five fundamental principles of the ethical framework in 7.2.
6. Give one example of how objectivity applies in accounting.
7. List the four types of storage system named in 7.3.
8. Give one advantage and one disadvantage of cloud services.

Answers: 1. Business entity. 2. Any two of: an allowance for irrecoverable debts; writing off irrecoverable debts; valuing inventory at the lower of cost and net realisable value. 3. The business is expected to keep using the assets, so their cost is spread over their useful lives rather than valued at what they would fetch if sold now. 4. Materiality. 5. Integrity; objectivity; professional competence and due care; confidentiality; professional behaviour. 6. For example, not reducing the allowance for irrecoverable debts because the owner wants a higher profit, or not deciding a relative’s debt. 7. Manual, data storage devices, cloud services, other digital services. 8. Advantage: accessible from anywhere by authorised users, or provider back-ups, or safe from fire or theft at the premises. Disadvantage: needs a reliable internet connection, or ongoing cost, or dependence on the provider.