 In accounting, we have many principles, assumptions and concepts that help us determine the proper way to account for transactions. Let's look at a few of the basic ones. In this short video, we'll learn about four principles and concepts that guide us in accounting. The economic entity concept tells us that a business, regardless of how small, is a separate economic entity from its owners or owner. So the transactions for Dave's household and Dave's part-time hot dog stand must be accounted for separately. Note that this is only a financial accounting rule. Legally and for tax purposes, there may be no difference between the transactions for Dave's household and Dave's hot dog stand. But there is for financial accounting purposes and the preparation of financial statements. The going-concern concept assumes that businesses will continue indefinitely into the future unless otherwise reported. This is reviewed annually by external auditors. For investors and creditors, they should assume that the business will continue in business for the foreseeable future, hence the business is a going concern. The cost principle requires assets to be recorded at their purchase price, which we call cost. Then they will remain at that value because cost is verifiable and reliable. Generally assets are not increased in value when their fair market value increases because fair market value is less verifiable and reliable. Of course, there are some exceptions to the cost principle, but those exceptions tend to be more advanced topics. Financial transactions must be recorded and reported in a stable, accepted currency, usually of the country where the business operates, but dollars, euros and pounds are also acceptable. In the U.S., amounts are recorded in dollars. The dollar is considered a stable unit of measure. Throughout your study of accounting, you will learn more principles, concepts and assumptions that make up gap and help guide our accounting for financial transactions. That concludes this brief review of some of the basic principles, concepts and assumptions for financial accounting.