Exam (elaborations)
Accounting Principles (1).
- Module
- Ap Comp. Gov. Unit 2 test
- Institution
- Ap Comp. Gov. Unit 2 Test
Accounting Principles (1).
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Accounting PrinciplesThe consistency principle - ANS-states that, once you adopt an accounting principle or
method, continue to follow it consistently in future accounting periods.
The full disclosure principle - ANS-states that you should include in an entity's financial
statements all information that would affect a reader's understanding of those
statements.
The materiality principle - ANS-states that you are allowed to ignore an accounting
standard if the net impact of doing so has such a small impact on the financial
statements that a reader of the financial statements would not be misled.
The reliability principle - ANS-is the concept of only recording those transactions in the
accounting system that you can verify are reliable with objective evidence.
The time period principle - ANS-is the concept that a business should report the
financial results of its activities over a standard time period, which is usually monthly,
quarterly, or annually.
The conservatism principle - ANS-is the general concept of recognizing expenses and
liabilities as soon as possible when there is uncertainty about the outcome, but to only
recognize revenues and assets when they are assured of being received.
The economic entity principle - ANS-states that the recorded activities of a business
entity will be kept separate from the recorded activities of its owner(s) and any other
business entities.
The going concern principle - ANS-is the assumption that an entity will remain in
business for the foreseeable future. Conversely, this means the entity will not be forced
to halt operations and liquidate its assets in the near term at what may be very low
fire-sale prices.
The monetary unit principle - ANS-states that you only record business transactions that
can be expressed in terms of a currency. Thus, a company cannot record such
non-quantifiable items as employee skill levels, the quality of customer service, or the
ingenuity of the engineering staff.
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