THE ACCOUNTING CONCEPTS

Question 1

Unspoken rules that Accountants should observe in identifying transactions when communicating financial information

Answer 1

Accounting Concepts

Question 2

GAAP

Answer 2

Generally Accepted Accounting Principles

Question 3

Nature and amount of information included in the report reflect a series of judgemental trade-offs

Answer 3

Full disclosure Principle

Question 4

Life of the business is divided into series of reporting periods

Answer 4

Time period

Question 5

Business is assumed to carry on its operation for an indefinite period of time

Answer 5

Going Concern Assumption

Question 6

Information is material if its omission or misstatement could influence economic decisions

Answer 6

Materiality

Question 7

TRUE OR FALSE: Accrual is when expense is recognized when paid, not when incurred

Answer 7

FALSE.

Question 8

Income is recognized when earned, not when collected

Expense is recognized when incurred, not when paid

Answer 8

ACCRUAL

Question 9

Business unit is viewed separately from the owners

Answer 9

Entity Concept

Question 10

Costs are recognized as expense at the same time when the related revenue is recognized

Answer 10

Matching

Question 11

Financial reports are prepared in the basis of accounting rules that are applied consistently from one period to next

Answer 11

Consistency

Question 12

Information is stated in a common unit of measure

Answer 12

Monetary Assumption

Question 13

“Choose that which leads to lower equity.”

Answer 13

PRUDENCE OR CONSERVATISM

Question 14

Use of caution when making estimates

Answer 14

PRUDENCE OR CONSERVATISM

Question 15

This set of accounting principles are universally adopted and mandated

Answer 15

Generally Accepted Accounting Principles

Question 16

Set of rules, procedures, assumptions,postulates, and concepts followed in recording business transactions and events, and in the preparation of general purpose financial statements

Answer 16

Generally Accepted Accounting Principles

Question 17

IASC

Answer 17

International Accounting Standards Committee

Question 18

PFRSs

Answer 18

Philippine Financial Reporting Standards

Question 19

FRSC

Answer 19

Financial Reporting Standard Council

Question 20

Also known as Continuity Principle

Answer 20

Going Concern Assumption

Question 21

Business is assumed to have an indefinite life unless otherwise there is specific evidence to contrary

Answer 21

Time-Period Assumption

Question 22

Assumes that the business is going to operate or will continue to exist for an indefinite period

Answer 22

Going Concern Assumption

Question 23

Highly encourages fair presentation of financial statements, but separating the transactions of the owners and the business

Answer 23

Entity Assumption

Question 24

The Specific period in the sphere of Accounting principles

Answer 24

Accounting period or Time Period

Question 25

The business is treated as a person with personality separate and distinct from the owner or owners

Answer 25

Entity Assumption

Question 26

Transactions are recorded whenever they happen, notwithstanding the inflow or outflow of cash

Answer 26

Accrual basis

Question 27

Dictates that assets, on the date of acquisition, should be recognized at cost

Answer 27

Cost Principle

Question 28

Requires that expenses incurred should be matched against the revenues realized within the same accounting period.

Answer 28

Matching Principle

Question 29

Financial Statements should include only information that is considered material or significant

Answer 29

Materiality Principle

Question 30

Accounting methods and Procedures should be applied on a uniform basis from period to period to achieve comparability in the financial Statements

Answer 30

Consistency Principle

Question 31

Financial Statements should present all accounting information that will influence the economic decision of the different users

Answer 31

Adequate Disclosure Principle