Concept explainers
These accounting concepts were discussed in this and previous chapters.
- 1. Economic entity assumption.
- 2. Expense recognition principle.
- 3. Monetary unit assumption.
- 4. Periodicity assumption.
- 5. Historical cost principle.
- 6. Materiality.
- 7. Full disclosure principle.
- 8. Going concern assumption.
- 9. Revenue recognition principle.
- 10. Cost constraint.
Instructions
Identify by number the accounting concept that describes each situation below. Do not use a number more than once.
______ (a) Is the rationale for why plant assets are not reported at liquidation value. (Do not use the historical cost principle.)
______ (b) Indicates that personal and business recordkeeping should he separately maintained.
______ (c) Ensures that all relevant financial information is reported.
______ (d) Assumes that the dollar is the “measuring slick” used to report on financial performance.
______ (e) Requires that accounting standards be followed for all items of significant size.
______ (f) Separates financial information into time periods for reporting purposes.
______ (g) Requires recognition of expenses in the same period as related revenues.
______ (h) Indicates that fair value changes subsequent to purchase are not recorded in the accounts.
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Financial Accounting
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