Accounting Concepts

The accounting period of a business is separated into activitiess that help the business keep its accounting records in an orderly fashion.

• Accounting Period Cycle

• Source Document

• Fiscal Year

• None of the Above

Jeff's Construction, LLC bought a piece of equipment in 2001 for P 10,000. Today this piece of equipment is only worth P 2,000. Jeff would still report the equipment at its purchase price of P 10,000, less depreciation, even though its current fair market value is only P 2,000.

• Historical Principle
• Business Entity
• Accrual Principle
• Adequate Disclosure Principle

Which principle/guideline requires the company's financial statements to have footnotes containing information that is important to users of the financial statements?

• Historical Principle
• Business Entity
• Accrual Principle
• Adequate disclosure Principle

Concept: Financial information is reported for a specific period of time on financial statements.

• Matching Expenses with Revenue
• Accounting Period Cycle
• Business Entity

Concept: a business's records should never be mixed with an owner's personal records and reports

• adequate disclosure

• business entity

• objective evidence

• going concern

Concept: When a source document is prepared for each transaction

• going concern

• materiality

• realization of revenue

• objective evidence

Concept: When a business activity is large enough to impact business decisions, it should be recorded clearly in the financial statements

• realization of revenue

• materiality

• unit of measurement

• consistent reporting

Concept: Financial statements are prepared with the expectation that business will remain in operation indefinately

• going concern

• materiality

• accounting period cycle

• matching revenue with expenses

Concept: The same accounting procedures must be followed in the same way each accounting period

• accounting period cycle

• objective evidence

• consistent reporting

• materiality

Concept: Revenue is recorded at the same time goods or services are sold.

• realization of revenue

• the revenue principle

• going concern

• historical cost