GAAP

Question 1

Requires that each economic entity maintain separate records.

Answer 1

BUSINESS ENTITY

Question 2

Requires that a business use the same accounting policies and procedures from period to period.

Answer 2

CONSISTENCY

Question 3

Requires that each economic transaction be based on the actual original cost (also known as historical cost principle).

Answer 3

COST

Question 4

Requires that accounting information communicate sufficient information to allow users to make knowledgeable decisions.

Answer 4

FULL DISCLOSURE

Question 5

Assumes that a business will continue for the foreseeable future.

Answer 5

GOING CONCERN

Question 6

Requires that financial transactions be reported in the period in which they occurred/were realized. In other words, expenses are to be reported in the same period as the revenues they helped generate.

Answer 6

MATCHING

Question 7

Requires a business to apply proper accounting only for items that would affect decisions made by users.

Answer 7

MATERIALITY

Question 8

Requires that financial information be communicated in stable units of money.

Answer 8

MONETARY UNIT

Question 9

Requires that revenues be recorded when earned and expenses be recorded when incurred, which is not necessarily when cash is received (in the case of revenues) or paid (in the case of expenses).

Answer 9

RECOGNITION