Principals of Accounting? 7mark question
Answers
What is principles of accounting
?
Three meanings come to mind when you ask about principles of accounting...
Principles of accounting was often the title of the introductory course in accounting. It was also common for the textbook used in the course to be entitled Principles of Accounting.
Principles of accounting can also refer to the basic or fundamental principles of accounting: cost principle, matching principle, full disclosure principle, revenue recognition principle, going concern assumption, economic entity assumption, and so on. In this context, principles of accounting refers to the broad underlying concepts which guide accountants when preparing financial statements.
Principles of accounting can also mean generally accepted accounting principles (GAAP). In this context, principles of accounting includes both the underlying basic accounting principles and the official accounting pronouncements issued by the Financial Accounting Standards Board (FASB). These official pronouncements are the detailed rules or standards for specific topics.
Explanation:
The personal assets of the owner of a company will not appear on the company's balance sheet because of which principle/guideline?
Cost
Economic Entity
Monetary Unit
2.
Which principle/guideline requires a company's balance sheet to report its land at the amount the company paid to acquire the land, even if the land could be sold today at a significantly higher amount?
Cost
Economic Entity
Monetary Unit
3.
Which principle/guideline allows a company to ignore the change in the purchasing power of the dollar over time?
Cost
Economic Entity
Monetary Unit
4.
Which principle/guideline requires the company's financial statements to have footnotes containing information that is important to users of the financial statements?
Conservatism
Economic Entity
Full Disclosure
5.
Which principle/guideline justifies a company violating an accounting principle because the amounts are immaterial?
Conservatism
Full Disclosure
Materiality
6.
Which principle/guideline is associated with the assumption that the company will continue on long enough to carry out its objectives and commitments?
Economic Entity
Going Concern
Time Period
7.
A very large corporation's financial statements have the dollar amounts rounded to the nearest $1,000. Which accounting principle/guideline justifies not reporting the amounts to the penny?
Full Disclosure
Materiality
Monetary Unit
8.
Accountants might recognize losses but not gains in certain situations. For example, the company might write-down the cost of inventory, but will not write-up the cost of inventory. Which principle/guideline is associated with this action?
Conservatism
Materiality
Monetary Unit
9.
Which principle/guideline directs a company to show all the expenses related to its revenues of a specified period even if the expenses were not paid in that period?
Cost
Matching
Monetary Unit
10.
When the accountant has to choose between two acceptable alternatives, the accountant should select the alternative that will report less profit, less asset amount, or a greater liability amount. This is based upon which principle/guideline?
Conservatism
Cost
Materiality