May 01, 2022/ Steven Bragg
Accounting principles are the rules that an organization follows when reporting financial information. A number of basic accounting principles have been developed through common usage. They form the basis upon which the complete suite of accounting standards
have been built. The best-known of these principles are as follows: Accrual principle. This is the concept that accounting transactions should be recorded in the accounting periods when they actually occur, rather than in the periods when there are cash flows associated with them. This is the foundation of the accrual basis of accounting. It is important for the construction of financial statements that show what actually happened in an accounting
period, rather than being artificially delayed or accelerated by the associated cash flows. For example, if you ignored the accrual principle, you would record an expense only when you paid for it, which might incorporate a lengthy delay caused by the payment terms for the associated supplier invoice. Conservatism principle. This is the concept that you should record expenses and liabilities as soon as possible, but to record revenues and assets only when you are sure
that they will occur. This introduces a conservative slant to the financial statements that may yield lower reported profits, since revenue and asset recognition may be delayed for some time. Conversely, this principle tends to encourage the recordation of losses earlier, rather than later. This concept can be taken too far, where a business persistently misstates its results to be worse than is realistically the case.
These principles are incorporated into a number of accounting frameworks, from which accounting standards govern the treatment and reporting of business transactions. Which of the following accounting concepts states that an accounting transaction should be supported by sufficient evidence?One basic principles in accounting states that an accounting transaction has to be supported by sufficient evidence to allow two or more qualified individuals to arrive at essentially similar conclusion is called Objectivity Principle.
Which accounting concept or principle states that the transactions of a business must be recorded separately from those of its owners or other businesses Mcq?This concept is called business entity concept. It means that personal transactions of owners are treated separately from those of the business. Therefore any personal expenses incurred by owners of a business will not appear in the income statement of the entity. Was this answer helpful?
Which concept requires that accounting transaction should be free from bias of accountants and others?The concept of objectivity requires that accounting transaction should be recorded in an objective manner, free from the bias of accountants and others.
Which accounting concepts that financial statements should be stated in terms of a common financial denominator?Stating assets and liabilities and changes in them in terms of a common financial denominator is a prerequisite in measuring financial position and periodic net income.
|