Match the letter of each principle or assumption or qualitative characteristic with the appropriate statement.
-Requires the entity to give the same treatment to comparable transactions.
A)Business entity
B)Going concern
C)Time period
D)Monetary unit
E)Historical cost
F)Conservatism
G)Realization
H)Consistency
I)Full disclosure
J)Verifiability
K)Materiality
L)Industry practices

Question

Quizplus · Accepted Answer

Consistency requires the entity to give the same treatment to comparable transactions.

Answer: B
 Going concern assumes that the entity will continue to operate in the foreseeable future.

Answer: C
 The time period principle requires that financial information be reported in consistent time intervals.

Answer: D
 The monetary unit principle requires financial information to be measured and reported in a stable currency.

Answer: E
 Historical cost requires that assets be recorded at their original cost and later adjusted for depreciation or impairment.

Answer: F
 Conservatism requires recognizing losses and liabilities as soon as possible, but not recognizing gains until they are certain.

Answer: G 
 Realization principle requires that revenue be recognized when it is earned and realized.

Answer: I 
 Full disclosure requires that all relevant financial information be disclosed in the financial statements and footnotes.

Answer: J
 Verifiability means that financial information must be capable of being checked by independent parties.

Answer: K
 Materiality requires that information be relevant and significant enough to influence the decisions of users of financial information.

Answer: A
 Business entity principle requires that the financial affairs of a business should be kept separate from its owner(s) and any other business.

Answer: L
 Industry practices mean that accounting practices vary by industry and that there may be different acceptable accounting procedures within the industry.

Match the Letter of Each Principle or Assumption or Qualitative