accounting concepts and principles

Question 1

the purpose of _______ is to promote understanding among people of different origins

Answer 1

common language

Question 2

this tells that the business will continue to operate at an indefinite period of time

Answer 2

assumption of going concern

Question 3

this recognizes an economic or business entity as an individual accounting entity, it is separated from its owners, managers, and employees. the entity, therefore, has its own identity and should have its own accounting apart from the people involved in it.

Answer 3

accounting entity concept

Question 4

this tells that money is stable, although in reality it is not.

Answer 4

monetary unit concept

Question 5

this tells that the business entity’s indefinite time of existence is divided into time periods or accounting periods with equal lengths.

Answer 5

time period or periodicity concept

Question 6

there are two types of periodicity concept. what are these

Answer 6

calendar period

fiscal period

Question 7

this tells that revenue or income is recognized when it is earned regardless of when it is received, and expense is recognized when it is incurred regardless of when it is paid.

Answer 7

accrual concept

Question 8

enumerate the accounting principles that are related to the accrual concept

Answer 8

revenue recognition principle
expense recognition principle
matching principle

Question 9

_______ is the inflow of asset from the sale of goods and services

Answer 9

revenue/income

Question 10

_______ refers to the consumption of resources. it is an outflow of asset

Answer 10

expense

Question 11

the _______ is established in recognition to the fact that there is a cause-and-effect relationship between revenue and expense

Answer 11

matching principle

Question 12

this indicates that accountants should disregard accounting standards for trivial matters or for those transactions that are not important to influence decisions. but it also tells that all important matters must be recorded and disclosed.

Answer 12

materiality concept

Question 13

this guides accountants in presenting information free from biases as evidenced by documents

Answer 13

objectivity/reliability concept

Question 14

this tells that the value of assets is recorded at their original cost

Answer 14

cost concept

Question 15

this is when accountants choose the worst case scenario for the company when it is faced with significant uncertainties about an accounting problem

Answer 15

conservatism concept