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Introduction to Accounting Standards and Concepts

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Introduction to Accounting Standards and Concepts

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Questions and Answers

What do accounting standards emphasize more on, according to the text?

Historical cost

Neutrality (correct)

Fair values

Prudence

How are non-current assets disclosed according to the Cost concept?

At cost less depreciation less any impairment (correct)

At market value

At fair value only

At original cost only

What is the purpose of depreciation for assets like Machinery or Office furniture?

To reflect the appreciation in value

To reduce their cost

To write off every year due to diminishing value (correct)

To increase their value

Under the Money measurement concept, what is excluded from being measured?

Items that can't be measured in monetary terms Signup and view all the answers

What is a conservative approach towards recording investment type assets?

Recording at market value Signup and view all the answers

What is the definition of the business entity concept?

All of the above Signup and view all the answers

According to the realization concept, when is income recognized?

When the customer buys the product on account Signup and view all the answers

What is the definition of the accrual concept?

Both a and c Signup and view all the answers

What is an example of the accrual concept?

Company A pays R30,000 rentals for Feb, March and April on 1 Feb 2014, with a year-end of 31 March Signup and view all the answers

What is the definition of goodwill?

All of the above Signup and view all the answers

According to the matching concept, which of the following statements is true?

Income and expenses should be disclosed in the same Income Statement when earned or incurred Signup and view all the answers

What does the dual aspect concept form the basis for?

Double-entry bookkeeping Signup and view all the answers

According to the materiality principle, when should an issue be disclosed?

Only if the issue would add to the reader's understanding of the business Signup and view all the answers

Which of the following statements best describes the prudence concept?

Assets and profits should be reported at the lowest reasonable figure, while liabilities and expenses should be reported at the highest reasonable figure Signup and view all the answers

What is the assumption behind the going concern concept?

The business will continue in operational existence for at least the next 12 months Signup and view all the answers

What should be disclosed when there is a change to accounting policies?

The change should be disclosed, and the impact should be explained Signup and view all the answers