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13 A B D F : Certain underlying considerations have had an important impact on the development of generally accepted accounting principles. Following is a
13 A B D F : Certain underlying considerations have had an important impact on the development of generally accepted accounting principles. Following is a list of these underlying considera- tions, as well as a list of statements describing them. K L a. Going concern or continuity b. Monetary unit C Conservatism d. Matching e. Full disclosure f. Materiality g Transaction approach h. Accrual basis Your answer L Industry practices . Verifiability kConsistency L Realization m. Historical cost n. Time period o. Business entity 1 (example) 2 4 1. The business for which the financial statements are prepared is separate and distinct from the owners 5 6 2 The assumption is made that the entity will remain in business for an indefinite period of time 3. Accountants need some standard of measure to bring financial transactions together in a meaningful way 4 Revenue should be recognized when the earning process is virtually complete and the exchange value can be objectively determined. S. This concept deals with when to recognize the costs that are associaned with the recognized revenue. 6. Accounting reports must disclose all facts that may influence the jadgment of an informed reader. 7 This concept involves the relative size and importance of an inem to a firm. 7 9 10 11 12 13 8 The accOantant is required to adhere as closely as possible to verifiable data. 9 Some cmpanies use accounting reports that do not conform to the general theory that underlies accounting 10 The accountant records only events that affect the financial position of the entity and, at the same time, can be reasonably determined in monetary tems 11 Revenue must be recognized when it is realized (realization concept), and expenses are ecognized when incurred (matching concept) 12. The entity must give the same treatment to comparable transactions fronm period to period The measurement with the least favorable effect on net income and financial 13. position in the current period must be selected
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