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. C4Principles and Assumptionsof AccountingMeasurement principle (also calledcost principle) means that accountinginformation is based on actual cost.Revenue recognition principleprovides guidance on when acompany must recognize revenue.Matching principle (expenserecognition) prescribes that acompany must record its expensesincurred to generate the revenue.]Going-concern assumption meansthat accounting information reflects apresumption the business willcontinue operating.Full disclosure principle requires acompany to report the details behindfinancial statements that would impactusers' decisions.Monetary unit assumption means wecan express transactions in money.Time period assumption presumesthat the life of a company can bedivided into time periods, such asmonths and years.Business entity assumption meansthat a business is accounted forseparately from its owner or otherbusiness entities.

Accounting principle is followed by the companies while preparing the financial statement. It esurea…

Answered: accounting principles

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

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.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions