Accounting Concepts L2

Question 1

fundamental principles that guide the preparation and presentation of financial statements.

Answer 1

Accounting concepts

Question 2

a business is separate from its owners or other businesses.

Answer 2

Entity Concept

Question 3

Only transactions that can be measured in monetary terms are recorded.

Answer 3

Money measurement concept

Question 4

Financial activities are divided into specific time periods (e.g., monthly, quarterly, annually) for reporting purposes.

Answer 4

Periodicity Concept

Question 5

revenues and expenses are recognized when they are earned or incurred, regardless of cash flow.

Answer 5

Accrual Concept

Question 6

assumes that a business will continue to operate indefinitely unless there is evidence to the contrary.

Answer 6

Going concern assumption

Question 7

should be matched with the revenues

Answer 7

Matching concept

Question 8

Revenues are recorded when they are realized or realizable

Answer 8

Revenue recognition concept

Question 9

Every financial transaction has two sides—debit and credit

Answer 9

Dual aspect concept

Question 10

accountants to anticipate no profits but anticipate all losses

Answer 10

Conservatism Principle

Question 11

Companies should use the same accounting methods and principles from one period to another to ensure comparability over time.

Answer 11

Consistency Principle

Question 12

All significant information that could influence decision-making must be included in financial statements; trivial matters can be omitted.

Answer 12

Materiality Principle

Question 13

Financial statements should provide all necessary information for stakeholders

Answer 13

Full disclosure principle