accounting principles
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Provide a good illustration of how businesses should adhere to accounting principles and assumptions, as discussed on slide 16 of Chapter 1.
Use this example as a guide for your answer.
According to the cost accounting principle, if a firm purchases land for SR400,000 but an outside appraiser values it at SR600,000, the land should still be recorded in the books at SR400,000.
![C4
Principles and Assumptions
of Accounting
Measurement principle (also called
cost principle) means that accounting
information is based on actual cost.
Revenue recognition principle
provides guidance on when a
company must recognize revenue.
Matching principle (expense
recognition) prescribes that a
company must record its expenses
incurred to generate the revenue.
]
Going-concern assumption means
that accounting information reflects a
presumption the business will
continue operating.
Full disclosure principle requires a
company to report the details behind
financial statements that would impact
users' decisions.
Monetary unit assumption means we
can express transactions in money.
Time period assumption presumes
that the life of a company can be
divided into time periods, such as
months and years.
Business entity assumption means
that a business is accounted for
separately from its owner or other
business entities.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9c19599b-77d1-4720-9166-c90506483400%2F74ced628-0f72-42e1-b134-f19f5ec52352%2F3g6tz4m_processed.jpeg&w=3840&q=75)
Transcribed Image Text:C4
Principles and Assumptions
of Accounting
Measurement principle (also called
cost principle) means that accounting
information is based on actual cost.
Revenue recognition principle
provides guidance on when a
company must recognize revenue.
Matching principle (expense
recognition) prescribes that a
company must record its expenses
incurred to generate the revenue.
]
Going-concern assumption means
that accounting information reflects a
presumption the business will
continue operating.
Full disclosure principle requires a
company to report the details behind
financial statements that would impact
users' decisions.
Monetary unit assumption means we
can express transactions in money.
Time period assumption presumes
that the life of a company can be
divided into time periods, such as
months and years.
Business entity assumption means
that a business is accounted for
separately from its owner or other
business entities.
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