Question

In: Accounting

Match each of the following basic concepts and principles to the appropriate description. Conservatism Expense recognition...

Match each of the following basic concepts and principles to the appropriate description.

Conservatism
Expense recognition
Consistency
Materiality
Disclosure

The accountant should exercise the option that results in a lower balance of assets, lower net income or a higher balance of debt.

 Answer 1Choose...ConsistencyDisclosureExpense recognitionMaterialityConservatism

The costs of doing business must be record in (or matched to) the same account period as the revenues which they helped to generate.

 Answer 2Choose...ConsistencyDisclosureExpense recognitionMaterialityConservatism

This prevents people from changing accounting methods for the sole purpose of manipulating figures on the financial statements.

 Answer 3Choose...ConsistencyDisclosureExpense recognitionMaterialityConservatism

Any and all information that affects the full understanding of a company's financial statements must be included with the financial statements.

 Answer 4Choose...ConsistencyDisclosureExpense recognitionMaterialityConservatism

This refers to the significance of information to users. The more significant a piece of information is means that it could influence or change a user's decision.

Solutions

Expert Solution

Expense recognition- It states that expenses incurred in an accounting period should be matched with revenues during that period. The expense recognition concept implies that all revenues earned during an accounting year, whether received during that year or not and all costs incurred, whether paid during the year or not should be taken into account, while ascertaining profit or loss for that year.

Disclosure Principle- The principle of disclosure requires that all material and relevant facts concerning financial performance of an enterprise must be fully and completely disclosed in the financial statements and their accompanying footnotes. This is to be enable the users to make correct assessments about the profitability and financial soundness of the enterprise and help them to take informed decisions.

The Materiality Principle- This principle requires that accounting records should consist only of such events which are significant from the point of view of income determination. Insignificant or irrelevant items should not be shown in the books of accounts. Any fact would be considered as material if it is reasonably believed that its knowledge would influence the decision of the informed user of financial statements.

The Consistency Principle- Both inter-firm and intra-firm comparisons can be possible only when accounting policies and practices followed by the enterprises are uniform and are consistent over the period of time. Consistency Principle states that accounting policies and methods should remain consistent from one year to another.

Conservatism Principle- The concept of conservatism requires that profits should not be recorded until realized but all losses even those which may have a remote possibility, are to be provided for in the books of accounts. Valuing closing stock at cost price or market price whichever is lower; Creating provision for doubtful debts; Writing off intangible assets like goodwill, patents etc from the books of accounts are some of the examples of the application of the principle of conservatism.

The accountant should exercise the option that results in a lower balance of assets, lower net income or a higher balance of debt. Conservatism
The costs of doing business must be record in (or matched to) the same account period as the revenues which they helped to generate. Expense recognition
This prevents people from changing accounting methods for the sole purpose of manipulating figures on the financial statements. Consistency
Any and all information that affects the full understanding of a company's financial statements must be included with the financial statements. Disclosure
This refers to the significance of information to users. The more significant a piece of information is means that it could influence or change a user's decision. Materiality

Kindly give a positive rating if you are satisfied with the answer. Feel free to ask if you have any doubts. Thanks.

ekkarill92 answered 1 year ago
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