The measurement principle, also called the cost principle:
A) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.
B) Prescribes that a company record the expenses it incurred to generate the revenue reported.
C) Prescribes that a company report the details behind financial statements that would impact users' decisions.
D) Provides guidance on when a company must recognize revenue.
E) Prescribes that accounting information is based on actual cost.

Question

Quizplus · Accepted Answer

The measurement principle, also known as the cost principle, prescribes that accounting information should be based on actual cost. This means that assets should be recorded at their historical cost or purchase price, and that expenses should be recorded at the actual cost incurred to generate the revenue being reported.

The Measurement Principle, Also Called the Cost Principle