PART 3 (accounting principles)

Question 1

Going concern

Answer 1

The company is assumed to remain in operation unless evidence to the contrary has been given

Question 2

Prudence

Answer 2

financial statements should not be based on overly optimistic expectations. A more conservative or even somewhat pessimistic view is to be preferred

Question 3

Realization

Answer 3

objective is not to overstate the results of the business. It states that a profit or gain can only be presented if it has actually been realized

Question 4

Matching

Answer 4

Expenses should be presented in the same period during which the resulting revenues are made

Question 5

Consistency

Answer 5

the same concepts and procedures should be followed each year when preparing the financial statements

Question 6

Accruals

Answer 6

revenues and expenses are recognized and recorded on the income statement when they are earned or incurred, not when actual cash settlemant has taken place

Question 7

Objectivity

Answer 7

financial reports should be composed in an objective manner, should be free as possible from personal opinion

Question 8

Verifiability

Answer 8

It must be possible to check whether the information provided is correct

Question 9

Relevance

Answer 9

Choices of what to include in the reports should be based on relevance