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Cost principal
revenue recognition
Selling price
Entity Concept
© Business Entity Concept Accounting records be kept separate to owners records, other business etc. © The Continuing Concern Concept A business will continue to operate unless it is known that it will not. © The Principle of Conservatism All records must be fair and reasonable. © The Objectivity Principle Recorded on the basis of objective evidence. Objective evidence means anyone looking at the evidence will arrive at the same answer. © Revenue Recognition Convention States that revenue is recorded in the accounts at the same time the transaction is completed. © Time Period Concept Provides that accounting take place over the fiscal periods. © The matching Principle An extension of revenue recognition. Each expense item related to revenue earned must be recorded in the same accounting period as the revenue it helped to earn. © The Cost Principle The accounting for purchases must be at the cost price to the purchaser. © The Consistency Principle Business must use the same accounting methods and procedures from period to period. © The Materiality Principle The materiality principle requires accountants to follow generally accepted accounting principles except when to do so would be expensive or difficult. © The Full Disclosure Principle States that all the information needed for a full understanding of a company's financial statements must be included.
Cost principal
The full disclosure principle requires that the notes to the financial statements report a change in accounting method for inventory.
revenue recognition
Selling price
Entity Concept
Full Disclosure Principle
© Business Entity Concept Accounting records be kept separate to owners records, other business etc. © The Continuing Concern Concept A business will continue to operate unless it is known that it will not. © The Principle of Conservatism All records must be fair and reasonable. © The Objectivity Principle Recorded on the basis of objective evidence. Objective evidence means anyone looking at the evidence will arrive at the same answer. © Revenue Recognition Convention States that revenue is recorded in the accounts at the same time the transaction is completed. © Time Period Concept Provides that accounting take place over the fiscal periods. © The matching Principle An extension of revenue recognition. Each expense item related to revenue earned must be recorded in the same accounting period as the revenue it helped to earn. © The Cost Principle The accounting for purchases must be at the cost price to the purchaser. © The Consistency Principle Business must use the same accounting methods and procedures from period to period. © The Materiality Principle The materiality principle requires accountants to follow generally accepted accounting principles except when to do so would be expensive or difficult. © The Full Disclosure Principle States that all the information needed for a full understanding of a company's financial statements must be included.
There is no one accounting principle that requires that a transaction be recorded in the period it occurs (commonly referred to as accrual basis accounting). There is a conceptual statement that the Financial Accounting Standard Board has issued with regard to the use of accrual accounting. The Financial Accounting Standards Board has issued STATEMENT OF FINANCIAL ACCOUNTING CONCEPTS NO. 6: ELEMENTS OF FINANCIAL STATEMENTS which states in paragraph 134: Items that qualify under the definitions of elements of financial statements and that meet criteria for recognition and measurement are accounted for and included in financial statements by the use of accrual accounting procedures. The basis of accounting, whether cash basis or accrual, should be disclosed in the notes to the financial statements so that the financial statement reader is aware which method of accounting is in use. Generally accepted accounting principles (GAAP) does require the accrual basis of accounting; nevertheless, businesses can present their financial statements on a cash basis as long as proper disclosures are made. The financial statement opinion rendered by the external audit firm would also disclose that the cash basis of accounting is being used.
A broad principle that requires identifying the activities of a business with specific time periods such as months, quarters, or years is the: A) Operating cycle of a business. B) Time period principle. C) Going-concern principle. D) Matching principle. E) Accrual basis of accounting.
At the end of the period, double-entry accounting requires that debits and credits recorded in the general ledger be equal.
The historical cost principle is an accounting principle that requires transactions and economic events to be valued in the financial statements at the actually dollar amounts involved when the transaction or economic event took place.For example if the market price of a teddy bear is $5.00 but you are able to bargain your way into getting it for $4.50, the historical cost principle requires that you record the teddy bear at $4.50.
False. Under the accrual basis of accounting, revenue is recorded when earned, not necessarily when cash is received. Revenue is earned when a sale is made, whether the customer pays cash or makes the purchase on account.