accounting principles
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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.
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- Which of the following is considered a constraint on useful information by Statement of Financial Accounting Concepts No. 8? a. benefits costs b. conservatism c. timeliness d. verifiabilityWhich of the following is not a criterion to recognize revenue under GAAP? A. The earnings process must be completed. B. A product or service must be provided. C. Cash must be collected. D. GAAP requires that the accrual basis accounting principle be used in the revenue recognition process.Which of the following statements is true? Under cash-basis accounting, revenues are recorded when a company satisfies its performance obligations and expenses are recorded when incurred. Accrual-basis accounting records both cash and noncash transactions when they occur. Generally accepted accounting principles require companies to use cash-basis accounting. The key elements of accrual-basis accounting are the revenue recognition principle, the expense recognition principle, and the historical cost principle.
- Which concept states that any policies adopted for accounting should not change frequently unless it is the demand of the changing circumstances Oa. Cost Concept O b. Money Measurement Concept Oc. Consistency Concept O d. Going Concern ConceptListed below are several information characteristics and accounting principles and assumptions. Match the letter of each with the appropriate phrase that states its application. (Items a through k may be used more than once or not at all.) Economic entity assumption g. Matching principle Going concern assumption h. Full disclosure principle Monetary unit assumption i. Relevance characteristic Periodicity assumption j. Reliability characteristic Historical cost principle k. Consistency characteristic Revenue recognition principle ____ 1. Stable-dollar assumption (do not use historical cost principle). ____ 2. Earning process completed and realized or realizable. ____ 3. Presentation of error-free information with representational faithfulness. ____ 4. Yearly financial reports. ____ 5. Accruals and deferrals in the adjusting and closing process. (Do not use going concern.) ____ 6. Useful standard measuring unit for business…Question: Which accounting principle states that revenue should be recognized when it is earned and expenses when they are incurred? a. Matching principle b. Revenue recognition principle c. Conservatism principle d. Time period principle
- An internal accounting system should: a. provide information to enable costs to be minimized b. provide financial accounting data for external reporting purposes c provide management accounting information for decision-making d. provide data for tax purposes e. all of the abovePresented below are the assumptions, principles, and constraint used in this chapter. 1. Economic entity assumption 2. Going concern assumption 3. Monetary unit assumption 4. Periodicity assumption 5. Measurement principle (historical cost) 6. Measurement principle (fair value) 7. Expense recognition principle 8. Full disclosure principle 9. Cost constraint 10. Revenue recognition principle Instructions Identify by number the accounting assumption, principle, or constraint that describes each situation below. Do not use a number more than once. a. Allocates expenses to revenues in the proper period. b. Indicates that fair value changes subsequent to purchase are not recorded in the accounts. (Do not use revenue recognition principle.) c. Ensures that all relevant financial information is reported. d. Rationale why plant assets are not reported at liquidation value. (Do not use historical cost principle.) e. Indicates that personal and…Before revenue can be recognized, the revenue recognition principle requires the _____. A. Product to be shipped B. Cash to be transferred C. Service to be booked D. Performance obligation be fulfill
- Identify the following questions as most likely to be asked by an internal (I) or an external (E) userof accounting information. What are the costs of our service to customers?Listed below are the current Accounting Assumptions and Principles Economic Entity Assumption Monetary Unit Assumption Historical Cost Principle Going Concern Assumption Revenue Recognition Principle Full Disclosure Principle Time Period Assumption Matching Principle Required: For the following situations, identify whether the situation represents a violation or a correct application of GAAP, and which assumption/principle is applicable. h. Nixon Corp records and maintains their books at cost and/or current value, not at a liquidated value. Violation: (Yes/No) Applicable Assumption/Principle: i. Wages of $4,000 related to the last two days of July, were recorded as expense in July even though they were paid in August. Violation: (Yes/No) Applicable…Which of the following requires accounting information to be complete, neutral, and free from material error? Faithful representation concept Cost principle Economic entity assumption Going concern assumption