Concept Introduction:
General accounting principle:
Generally Accepted Accounting Principle also known as GAAP are a set of principles and procedures in accounting which are widely accepted and commonly used in the preparation of financial statements by business entities. GAAP's principles and procedures are framed by a policy board i.e. the governing authority whose guidelines must be followed by a business entity at the time of preparing and filing financial statements. GAAPs help in presenting the financial information in a chronological and less- sophisticated manner.
Measurement (cost) principle:
Measurement (cost) Principle is a standard accounting guideline, which emphasizes on recording assets as cash or cash equivalents at the time of acquisition/purchase. It is also known as the Historical (Cost) Principle.
Business entity assumption:
Business Entity Assumptions are a set of principles of financial accounting, which states that a business is a separate legal and financial entity apart from its owners/stake holders and its employees. The personal financial condition of its owners/stake holders or employees will not have any impact on the financial status and position of the business entity. Business Entity assumption is also called Separate Entity Assumption.
Revenue recognition principle: The principle of revenue recognition states that the revenues are realized or deemed to be realizable when goods are sold or services are provided irrespective of cash receipts i.e. when the cash will be received.
Expense recognition principle:
The principle of expense recognition states that expenses are deemed to be recognized in the same time interval as revenue to which it relates. If it is not recognized in the same time interval then it is deemed to be an expense incurred, which would pre-date or follow the period of the receipt of revenue.
Going concern assumption:
The principle of Going Concern assumes that a business entity will have perpetual succession or pro-longed existence and unforeseen factors such as winding up or closure will not take place in the near future. With this in mind, an accountant is entitled to defer the recognition of several expenditures to a later period till when a company is assumed to be operating with these assets in an efficient manner.
To write:
To understand the general accounting principle, measurement (cost) principle, business entity assumption, revenue recognition principle, expense recognition principle and going concern assumption.
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Chapter 1 Solutions
FUNDAMENTAL ACCOUNTING PRINCIPLES
- Please explain the solution to this general accounting problem with accurate explanations.arrow_forwardRead The company events occured during the first half of the year and answer the following questions: 1)Determine the importance of the company having property, plant, and equipment as part of the long-term assets on its balance sheet. 2)What are the costs for determining what is included in the acquisition of property, plant, and equipment? 3)What are the methods you can use to calculate depreciation? Which method makes the most sense for this company? 4)Taking into account the disposal of property, plant, and equipment, what is the correct way to record a disposal?arrow_forwardCan you guide me through solving this financial accounting problem using proper techniques?arrow_forward
- Read The company events occured during the first half of the year and answer the following questions: 1)Determine the importance of the company having goodwill or intangibles as part of the long-term assets on its balance sheet. 2)How do companies acquire goodwill? 3)What are examples of intangible assets and how are they amortized?arrow_forwardCan you demonstrate the accurate method for solving this financial accounting question?arrow_forwardComputer Zone sells laptops. During August 2023, it sold 320 laptops at a $1,850 average price each. The August 2023 budget included sales of 350 laptops at an average price of $1,750 each. Compute the sales price variance and the sales volume variance for August 2023.arrow_forward
- The standard cost of Product ZZ includes 3 hours of direct labor at $16 per hour. The predetermined overhead rate is $28 per direct labor hour. During September, the company incurred 3,600 hours of direct labor at an average rate of $15.75 per hour and $94,200 of manufacturing overhead costs. It produced 1,200 units. Compute the total overhead variance.arrow_forwardCan you help me solve this general accounting question using valid accounting techniques?arrow_forward1) Determine the importance of the company having long-term investments as part of the long-term assets on its balance sheet. 2)Should they retain long-term investments? 3)How is the right-of-use asset determined on inception of the lease? 4)How do you calculate the amortization the cost of a leased asset? 5)Cite the applicable FASB Codification section for the following items as a list: property plant and equipment, investments, and intangibles.arrow_forward
- https://investor.exxonmobil.com/sec-filings/annual-reports/content/0000034088-25-000010/0000034088-25-000010.pdf Use link to help me answer my questions please in picturearrow_forwardThe standard cost of Winter Boots includes 4 units of direct materials at $7.50 per unit. During October, the company buys 35,000 units of direct materials at $7.20 and uses those materials to produce 8,500 units. Compute the total, price, and quantity variances for materials.arrow_forwardCalculate the labor variancearrow_forward
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