INTERMEDIATE ACCOUNTING EXAM 1-
ASSUMPTIONS, PRINCIPLES AND
CONSTRAINTS- QUESTIONS WITH
COMPLETE ANSWERS
Revenue should be recognized when the performance obligation is satisfied, which is
usually when the sale has been made and the product delivered to the customer -
Answer-revenue recognition principle
economic entity - Answer-economic activity can be identified with a particular unit of
accountability
- corporation is kept separate from owners
going concern - Answer-company will have a long life
- will last long enough to fulfill commitments
- depreciation and amortization policies justifiable
monetary unit - Answer-money is common denominator for economic activity and
provides a basis for accounting measurement
- relevant, useful, universally available, understandable
periodicity - Answer-company can divide its economic activities into artificial time
periods
- monthly, quarterly, yearly
Basic principles of accounting - Answer-1. measurement
2. revenue recognition
3. expense recognition
4. full disclosure
full disclosure principle - Answer-nature and amount of info included in financial reports
reflects a series of judgement trade-offs
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