Exam 1 (Chapters 1, 2, and 3)

Question 1

Cost Principle

Answer 1

The cost principle states that when a business acquires assets or services, they should be recorded at their actual cost, also called historical cost.

Question 2

Acquired assets and services should be recorded at their actual cost.

Answer 2

Cost Principle

Question 3

Reliability Principle

Answer 3

Information should be verifiable, confirmable by an independent observer; also called objectivity principle.

Question 4

Data must be verifiable.

Answer 4

Reliability Principle

Question 5

Which account principle specifically states that we should record transactions at amounts that can be verified?

Answer 5

Reliability Principle

Question 6

Jill Riggins owns and operates Jill’s Java Coffee Shop. She proposes to account for the shop’s assets at their current market value in order to have current amounts on the balance sheet. Which account concept or principle does Jill violate?

Answer 6

Cost Prinicple