Chap 5,6,7

Question 1

Going concern theory

Answer 1

A business is assumed to have an indefinite economic life unless there is credible evidence that it may close down

Question 2

Accounting period theory

Answer 2

The life of a business is divided into regular time intervals

Question 3

Revenue recognition theory

Answer 3

Revenue is earned when goods have been delivered or services have been provided.

Question 4

Accrual basis of accounting

Answer 4

Business activities that have occurred, regardless of whether cash is paid or received, should be recorded in the relevant accounting period

Question 5

Matching theory

Answer 5

Expenses incurred must be matched against income earned in the same period to determine profit for that period