Accounting Principles

Question 1

Going concern

Answer 1

The life of the business is assumed to be continuous, and it’s records are kept on this basis

Question 2

Reporting period

Answer 2

The life of the business must be divided into periods of time allow reports to be prepared; these accounting reports should reflect the Reporting Period in which a transaction occurs

Question 3

Historical cost

Answer 3

The recording of a transaction at its original cost or value, as this value is verifiable by reference to the source document

Question 4

Conservatism

Answer 4

Losses should be recorded when probable but gains only when certain, so that liabilities and expenses are not understated and assets and revenues are not overstated

Question 5

Consistency

Answer 5

accounting methods should be applied in a consistent manner to ensure that reports are comparable between periods

Question 6

Monetary unit

Answer 6

All items must be recorded and reported in a common unit of measurement

Question 7

Entity

Answer 7

The business is assumed to be separate from the owner and other businesses, and it’s records should be kept on this basis