ACCOUNTING RECORDS

Why is it important for businesses to follow uniform accounting practices?

• To increase personal expenses

• To make it easier for stakeholders to understand reports

• To confuse stakeholders

• To avoid paying taxes

What does the entity concept state about a business?

• It has no distinct identity

• It can mix personal and business expenses

• It is a separate entity from its owner

• It is the same as its owner

How should Peter treat the cost of a machine that will benefit his business for 10 years?

• Ignore the cost completely

• Record it as a personal expense

• Record it as an asset and spread the cost over 10 years

• Record the entire cost as an expense this year

What happens to the value of an asset each year according to the going concern concept?

• It stays the same

• It is ignored after the first year

• It decreases by a portion each year

• It increases every year

Why might a bank hesitate to provide a loan to a business?

• If the business is not a going concern

• If the business is profitable

• If the business has too many assets

• If the business has a good reputation