Question

Complete the following work sheet:
(i) If a firm believes that some of its debtors may ‘default’, it should act on this by making sure that
all possible losses are recorded in the books. This is an example of the $..............$ concept.
(ii) The fact that a business is separate and distinguishable from its owner is best exemplified by
the $..............$ concept.
(iii) Everything a firm owns, it also owns out to somebody. This co-incidence is explained by
the $..............$ concept.
(iv) The $..............$ concept states that if straight line method of depreciation is used in one year,
then it should also be used in the next year.
(v) A firm may hold stock which is heavily in demand. Consequently, the market value of this stock
may be increased. Normal accounting procedure is to ignore this because of the $..............$.
(vi) If a firm receives an order for goods, it would not be included in the sales figure owing to the
$..............$.
(vii) The management of a firm is remarkably incompetent, but the firms accountants can not take
this into account while preparing book of accounts because of $..............$ concept.

Answer 1

The correct fill in the blanks are -

(i) If a firm believes that some of its debtors may ′default′, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the conservatism concept.

(ii)  The fact that a business is separate and distinguishable from its owner is best exemplified by the business entity concept.

(iii)  Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the dual aspect concept.

(iv)  The consistency concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.

(v)  A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the conservatism.

(vi)  If a firm receives an order for goods, it would not be included in the sales figure owing to the revenue recognition.

(vii)  The management of a firm is remarkably incompetent, but the firm’s accountants cannot take this into account while preparing book of accounts because of money measurement concept.

Answer 2

Fill in the blanks are as follows;

Explanation:

i. Conservatism concept also recognise as Doctrine of prudence. This concept also anticipate for future losses but no liability for profits in future

ii. Buisness entity, These entities acts as buisness law which are compiled according to corporate law by which they involve in buisness activities.

iii. dual aspect, by the concept of dual aspect it says that all the transaction related to buisness should be recorded in two distinct accounts.

iv. consistency, this concept says that once the method of accounting is adopted it should be followed with consistency to maintain regularity.

v.  conservatism concept also recognise as Doctrine of prudence. This concept also anticipate for future losses but no liability for profits in future

vi. revenue recognisation also acts accural accounting principle which stipulate the methodology of recognisation of revenue.

vii. money measurement recognises the fact that all the recorded transaction get measured in terms of local currency.

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