ACCOUNTING PRINCIPLES 15TH EDITION
ACTUAL QUESTIONS AND CORRECT
ANSWERS
◉ Business Entity Assumption.
Answer: Means that a business is accounted for separately from
other business entities, including its owner.
◉ Comparability.
Answer: Different companies may use different accounting methods,
there is still sufficient basis for valid comparison
◉ Conservatism constraint.
Answer: Select the accounting method that is least likely to overstate
revenue and understate expenses
◉ Consistency constraint.
Answer: Must use the same accounting method for all events
◉ Cost-benefit relationship constraint.
Answer: Ensure financial information is beneficial enough to justify
the cost of preparing it
, ◉ Economic entity assumption.
Answer: An organization stands apart from other organizations and
individuals as a separate economic unit
◉ Expense recognition principle (matching principle).
Answer: Prescribes that a company record the expenses it incurred
to generate the revenue reported.
◉ Faithful representation.
Answer: Information must be truthful; complete, neutral, and free
from error
◉ Full disclosure principle.
Answer: Prescribes that a company report the details behind
financial statements that would impact users' decisions. (Typically
found in the footnotes to the statements.)
◉ Generally Accepted Accounting Principles (GAAP).
Answer: Rules, practices, and procedures that define the proper
execution of accounting
◉ Going-concern assumption.
ACTUAL QUESTIONS AND CORRECT
ANSWERS
◉ Business Entity Assumption.
Answer: Means that a business is accounted for separately from
other business entities, including its owner.
◉ Comparability.
Answer: Different companies may use different accounting methods,
there is still sufficient basis for valid comparison
◉ Conservatism constraint.
Answer: Select the accounting method that is least likely to overstate
revenue and understate expenses
◉ Consistency constraint.
Answer: Must use the same accounting method for all events
◉ Cost-benefit relationship constraint.
Answer: Ensure financial information is beneficial enough to justify
the cost of preparing it
, ◉ Economic entity assumption.
Answer: An organization stands apart from other organizations and
individuals as a separate economic unit
◉ Expense recognition principle (matching principle).
Answer: Prescribes that a company record the expenses it incurred
to generate the revenue reported.
◉ Faithful representation.
Answer: Information must be truthful; complete, neutral, and free
from error
◉ Full disclosure principle.
Answer: Prescribes that a company report the details behind
financial statements that would impact users' decisions. (Typically
found in the footnotes to the statements.)
◉ Generally Accepted Accounting Principles (GAAP).
Answer: Rules, practices, and procedures that define the proper
execution of accounting
◉ Going-concern assumption.
