Chapter 6

Question 1

consistency principal

Answer 1

businesses must use the same accounting principles from one period to the next, and must disclose changes on financial statements

Question 2

why consistency is important

Answer 2

easier to measure performance

Question 3

Disclosure Principle

Answer 3

A business’s financial statements must report enough information for outsiders to make knowledgeable decisions about the company

Question 4

information presented on financial statements must be

Answer 4

relevant, factual, and in good faith

Question 5

MATERIALITY CONCEPT

Answer 5

A COMPANY MUST PERFORM STRICTLY PROPER ACCOUNTING ONLY FOR ITEMS THAT ARE SIGNIFICANT TO THE BUSINESS’S FINANCIAL SITUATIONS

Question 6

material information

Answer 6

would change the decision of investors/stakeholders

Question 7

immaterial information

Answer 7

insignificant; unimportant

will not significantly impact financial statements

Question 8

conservativism

Answer 8

businesses should report the least favorable figures

Question 9

don’t anticipate

Answer 9

gains

Question 10

anticipate

Answer 10

losses

Question 11

record liabilities at the___ amount

Answer 11

highest

Question 12

rcord assets at the ___ amount

Answer 12

lowest