Rozana has a very knowledgeable and skilled worker, Ahmad who has been working for a number...

Rozana has a very knowledgeable and skilled worker, Ahmad who has been working for a number of years. She put a value on Ahmad’s contribution because of his skills and she records them in her books of accounts. This is violating the _________ concept. *

a.economic entity

b.money measurement

c.neutrality

d.materiality

Solutions

Expert Solution

Based on the information available in the question, the correct answer is Option C - Neutrality. Neutrality concept of accounting states that the financial statements must be free from errors or other bias. Financial statements and accounts cannot be prepared with a view to influence the decisions. As can be observed, Rozana , with her predetermined knowledge has put a value on Ahmad's contribution because of his skills based on which she records in her books of accounts . This is in violation of her being free from bias. Hence, this is the correct answer.

Option A is incorrect. Economic entity states that the activities of the owner are separate from those of the business. This concept is not applicable to the situation and hence is incorrect.

Option B is incorrect. Money measurement concept indicates that only those activities that can be measured in terms of money should be recorded in the books of accounts. This statement is not applicable to the above scenario and hence is incorrect.

Option D is incorrect. Materiality concept states that items that have the ability to alter or change the view of the users of the financial statements should be properly disclosed within the financial statements. This concept is not relevant to the situation per the question and is incorrect.

Please let me know if you have any questions via comments and all the best :)

ekkarill92 answered 1 year ago

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