VCE Accounting questions with correct answers
Entity principle - Answer The business is assumed to be separate from the owner and other businesses, and its records should be kept on this basis. Going concern principle - Answer The life of the business is assumed to be continuous, and its records are kept on that basis. Historical cost principle - Answer The recording of a transaction at its original cost or value, as this value is verifiable by reference to a source document. Reporting Period - Answer The life of the business must be divided into periods of time to allow reports to be prepared which reflect a business's transactions through that period. Consistency - Answer Accounting methods should be applied in a consistent manner to ensure that reports are comparable between periods. Conservatism - Answer This principle states that losses should be recorded when probable but gains should only be reported when certain, so that liabilities and expenses are not understated and assets and revenues aren't overstated. Monetary Unit - Answer All items must be recorded and reported in a common unit of currency measurement such as the Australian Dollar. Relevance - Answer Accounting reports should include all information that is useful for decision making. Reliability - Answer Accounting reports should contain information
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