Real World Money: 12 Fundamental Concepts

The video tutorial covers the fundamental concepts of Generally Accepted Accounting Principles (GAAP), which are essential for recording and analyzing financial transactions across various types of organizations. Key concepts include the entity concept, money measurement, going concern, cost principle, dual aspect, objectivity, time period, conservatism, realization, matching, consistency, and materiality. These principles ensure accurate financial reporting, enabling informed business decisions.

What does GAAP stand for in accounting?

• Global Accepted Accounting Policies

• Global Accounting and Auditing Practices

• Generally Accepted Accounting Principles

• General Accounting and Auditing Procedures

Which principle states that business transactions should be recorded separately from personal transactions?

• Money Measurement Principle

• Entity Concept

• Going Concern Principle

• Cost Principle

According to the money measurement principle, which of the following can be recorded in financial statements?

• Company reputation

• Customer satisfaction

• Employee skill levels

• Cost of packaging materials

What does the going concern principle assume about a business?

• It will be sold soon

• It will close within a year

• It will operate indefinitely

• It will merge with another company

Under the cost principle, how are assets recorded on the balance sheet?

• At their estimated future value

• At their historical cost

• At their replacement cost

• At their market value

What is the dual aspect concept based on?

• Triple-entry system

• Single-entry system

• Quadruple-entry system

• Double-entry system

Which principle ensures that financial statements are based on verifiable evidence?

• Realization Principle

• Objectivity Principle

• Conservatism Principle

• Matching Principle

What does the conservatism principle advise accountants to do?

• Ignore liabilities

• Understate assets and income

• Overstate assets and income

• Overstate liabilities

When is revenue recognized according to the realization principle?

• When a contract is signed

• When payment is received

• When an order is placed

• When goods are shipped

What does the matching principle require companies to do?

• Report all expenses at the beginning of the year

• Report expenses in the same period as related revenues

• Match expenses with unrelated revenues

• Ignore expenses until the end of the year