MODULE #3 - ACCOUNTING CONCEPTS AND PRINCIPLE

Question 1

form the foundation of the accounting profession

Answer 1

accounting concepts and principles

Question 2

Key accounting concepts and principles

Answer 2

1 Entity concept
2 Going concern concept
3 Accrual basis accounting
4 Consistency principle
5 Materiality principle
6 Prudence (conservatism) concept
7 Matching principle
8 Revenue recognition principle
9 Historical Cost principle
10 Consolidation principle

Question 3

Business and owners are separate entity

financial transaction should be recorded separately from personal transaction of owner

Answer 3

entity concept

Question 4

Business will continue to operate

financial statement are prepared in the belief that will remain in operation

Answer 4

going concern concept

Question 5

Revenue and expenses are recognized when they are earned or incurred regardless when the cash is received or paid

Answer 5

accrual basis accounting

Question 6

accounting procedures should be consistent

Answer 6

consistency principle

Question 7

financial statement should be presented and disclosed if it could influence the economic decisions of users

Answer 7

materiality principle

Question 8

accountants should be conservative in their approach, recognizing losses as soon they are foreseeable but only recognizing gain when they are realized

Answer 8

prudence (conservatism) concept

Question 9

expenses should be recognized in the same accounting period as the revenues they help to generate.

cost in earning revenue accurately reflect financial statements

Answer 9

matching principle

Question 10

revenue should be recognized when it is earned and realizable

Answer 10

revenue recognition principle

Question 11

assets should be recorded at their original cost

Answer 11

historical cost principle

Question 12

In group company, financial statement should be consolidated to present a true and fair view

Answer 12

consolidation principle