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Accounting Concepts Overview

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Questions and Answers

What is the main purpose of accounting concepts in financial accounting?

To lay down the basis of preparation of financial statements (correct)

To increase the market value of assets recorded

To allow accountants to use their personal judgment

To complicate the process of preparing financial accounts

How are assets recorded in financial accounting?

At market value

At open market value

At cost (correct)

At historical value

Which accounting assumption is related to valuing assets at cost?

Cost concept (correct)

Going concern concept

Double entry concept

Relevance concept

How does the double entry concept view financial transactions?

As multiple-sided events Signup and view all the answers

What does the Going Concern Concept assume about a business?

It will exist forever Signup and view all the answers

How are assets valued under the Going Concern Concept?

At open market value Signup and view all the answers

What is the purpose of the matching concept in accounting?

To match income with expenses in the same period Signup and view all the answers

In the context of financial statements, what does the consistency concept require of accountants?

To be consistent with accounting methods and policies Signup and view all the answers

What does the Money Measurement Concept imply about expressing assets and liabilities?

Both assets and liabilities must be expressed in monetary terms Signup and view all the answers

When does an expense become an accrued expense?

When the expense is not paid in the same accounting period it was incurred Signup and view all the answers

How are prepayments handled according to the matching concept?

They are allocated based on the related future period Signup and view all the answers

How do accountants handle changes in accounting methods or policies according to the consistency concept?

Disclose changes and their effects appropriately Signup and view all the answers