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Questions and Answers
Which concept ensures that a business's financial performance is assessed over equal periods of time?
What is the primary purpose of the Monetary Concept in accounting?
What is the main objective of the Accruals (Matching) Concept?
According to the Historical Cost Concept, how are assets typically recorded?
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What is the main purpose of the Consistency Concept in accounting?
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Which accounting concept ensures that a business's assets are recorded at their original purchase cost?
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What is the primary assumption of the Going Concern concept?
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Which concept recognizes that each business transaction affects at least two accounts?
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What is the primary purpose of the Materiality concept?
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Which accounting concept is most closely related to the idea that a business is a separate entity from its owners?
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Study Notes
Accounting Principles
- Accounting Entity: Each business, regardless of legal entity, requires separate records.
- Monetary Concept: Money is used as a common denominator, and all transactions are recorded in local currency; only monetary items are recorded.
- Going Concern: It is assumed that the business will continue operating in the future, and therefore, its financial statements are prepared accordingly.
Accounting Concepts
- Duality: Each transaction affects at least two accounts, resulting in debit and credit entries.
- Accounting Period Concept: A business is divided into equal periods to assess its performance.
- Accruals (Matching) Concept: Expenses and revenues are matched to the period in which they were incurred or earned.
Accounting Principles (continued)
- Materiality: Only significant items that are specifically identified are recorded.
- Historical Cost: Assets are recorded at their original purchase cost, with some exceptions for revaluation.
- Consistency: Consistent use of accounting methods is essential for clarity and comparability.
Accounting Principles
- Accounting Entity: Each business, regardless of legal entity, requires separate records.
- Monetary Concept: Money is used as a common denominator, and all transactions are recorded in local currency; only monetary items are recorded.
- Going Concern: It is assumed that the business will continue operating in the future, and therefore, its financial statements are prepared accordingly.
Accounting Concepts
- Duality: Each transaction affects at least two accounts, resulting in debit and credit entries.
- Accounting Period Concept: A business is divided into equal periods to assess its performance.
- Accruals (Matching) Concept: Expenses and revenues are matched to the period in which they were incurred or earned.
Accounting Principles (continued)
- Materiality: Only significant items that are specifically identified are recorded.
- Historical Cost: Assets are recorded at their original purchase cost, with some exceptions for revaluation.
- Consistency: Consistent use of accounting methods is essential for clarity and comparability.
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Description
This quiz covers the basic concepts of accounting, including the accounting entity, monetary concept, going concern, duality, accounting period, and accruals concepts.
