Accountint principles

Question 1

Going concern

Answer 1

Co. assumed to remain in operation unless evidence to the contrary

Question 2

Prudence

Answer 2

conservative view o profit, asset valuation and losses

Question 3

Realization

Answer 3

recognition of profit and losses on realization only

Question 4

matching

Answer 4

expenses presented in the same period for resulting revenues made

Question 5

Consistency

Answer 5

consistency in composing financial statements

Question 6

Accruals

Answer 6

revenues and expenses recognized and recorded when incurred, not when actual cash takes place

Question 7

Objectivity

Answer 7

financial statements prepared fee on personal opinion

Question 8

verifiability

Answer 8

possibility to check if the information provided is correct

Question 9

relevance

Answer 9

reports should be based on what is relevant

Question 10

economic entity assumption

Answer 10

separation of business transactions from personal transactions means financial statements can be prepared for a group (consolidation)

Question 11

Monetary unit assumption

Answer 11

allows accountants to express assets as dollar amounts and also assumes, the dollar does not lose purchasing power over time

Question 12

time period assumption

Answer 12

business operations and financial results can be divided into distinct periods (months, years)

Question 13

materiality

Answer 13

accounting principle can be ignored if the amount is significant