Cards (52)

  • The Going Concern concept assumes a business will operate for the foreseeable future
  • What does the Accrual concept require regarding revenue and expense recognition?
    When earned or incurred
  • Name four key fundamental accounting concepts.
    Accruals, Going Concern, Consistency, Prudence
  • What is an example of applying the Consistency concept?
    Using FIFO for inventory
  • Why is the Going Concern concept crucial for asset valuation?
    Historical cost basis
  • What does the Consistency concept enable stakeholders to compare effectively?
    Financial statements over time
  • Fundamental accounting concepts help ensure financial statements are accurate and useful for stakeholders.
    True
  • What do fundamental accounting concepts guide in financial statements?
    Preparation and presentation
  • Why is the Going Concern concept essential for depreciating assets over their lifespan?
    Avoids premature write-offs
  • What does the Accrual concept require regarding expense recognition?
    When incurred, regardless of payment
  • The Matching principle requires Cost of Goods Sold (COGS) to be recorded with the revenue from sales.
    True
  • The Consistency concept requires using the same accounting methods from period to period.

    True
  • The Going Concern concept assumes a business will cease operations in the near future.
    False
  • The Matching principle ensures expenses are recognized in the same period as the related revenues
  • The Going Concern concept assumes that a business will continue operating indefinitely
  • The Going Concern concept allows assets to be valued at liquidation value.
    False
  • What does the Prudence concept require accountants to avoid?
    Overstating assets and profits
  • The Prudence concept avoids overstating assets and profits
  • Under the Going Concern concept, how are assets and liabilities valued?
    At historical cost
  • Under the Going Concern principle, equipment with a lifespan of 10 years is depreciated annually
  • Under the Accruals concept, utility expenses incurred in December are recognized even if paid in January
  • The Consistency concept mandates that a business uses the same accounting methods from one period to the next
  • What is an example of applying the Consistency concept?
    Using FIFO for inventory
  • What is the importance of the Consistency concept for stakeholders?
    Enables comparability of trends
  • The Going Concern concept assumes a business will continue indefinitely without liquidation
  • Provide an example of the Consistency concept in action.
    Using straight-line depreciation consistently
  • Match the accounting concept with its explanation:
    Consistency ↔️ Same methods across periods
    Accruals ↔️ Recognize when earned or incurred
  • What is accrued revenue under the Accrual concept?
    Revenue earned but unpaid
  • The Matching principle ensures expenses are recognized in the same period as the related revenues
  • What does the Matching principle ensure about expenses and revenues?
    Expenses match related revenues
  • Give an example of applying the Accruals concept.
    Recording utility expenses in December
  • The Matching principle provides an accurate view of net income.

    True
  • What does the Accruals concept state about recognizing revenues and expenses?
    When they occur
  • The Revenue Recognition principle states that revenue should be recorded when it is earned
  • The Consistency concept requires businesses to use the same accounting methods from period to period.

    True
  • Under the Revenue Recognition principle, revenue from consulting services provided in December is recognized in December, even if payment is received in January.

    True
  • The Going Concern concept assumes that a business will operate indefinitely
  • An example of the Prudence concept is estimating potential bad debts to reduce asset value
  • Illustrate the Prudence concept with an example.
    Recording an allowance for bad debts
  • The Going Concern concept prevents premature asset write-offs.

    True