Accounting Principles Questions And Answers Verified 100% Correct

Accounting Principles Questions And Answers Verified 100% Correct The conservatism principle - ANSWER is the general concept of recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received. The economic entity principle - ANSWER states that the recorded activities of a business entity will be kept separate from the recorded activities of its owner(s) and any other business entities. The going concern principle - ANSWER is the assumption that an entity will remain in business for the foreseeable future. Conversely, this means the entity will not be forced to halt operations and liquidate its assets in the near term at what may be very low fire-sale prices. The monetary unit principle - ANSWER states that you only record business transactions that can be expressed in terms of a currency. Thus, a company cannot record such non-quantifiable items as employee skill levels, the quality of customer service, or the ingenuity of the engineering staff. The matching principle - ANSWER when you record revenue, you should also record at the same time any expenses directly related to the revenue. Thus, if there is a cause-and-effect relationship between revenue and the expenses, record them in the same accounting period. The revenue recognition principle - ANSWER states that, under the accrual basis of accounting, you should only recognize revenue when an entity has substantially completed a revenue generation process; thus, you recognize revenue when it has been earned. The cost principle - ANSWER is the general concept that you should initially record an asset, liability, or equity investment at its original acquisition cost. And acquisition cost is the sum of all the costs incurred to prepare the item for its intended use. The consistency principle - ANSWER states that, once you adopt an accounting principle or method, continue to follow it consistently in future accounting periods.