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ACC102 Quiz: accounting concepts application

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19 Oct 2021
School
De La Salle University
Department
Accounting
Course
ACC102
Professor

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Document Summary

Program and year: bsa 1 week 2 acc 101 financial accounting and reporting. Instructions: discuss how you can apply the basic accounting concepts listed below to grow your business. Your answers must be practical, meaning they are applicable in real-life settings. Limit you answers to 3-5 sentences only. (3 points each: separate entity concept. Under separate entity concept, the business activities are considered separate from the owner. For example, mr. x purchase equipment for personal use, it is recorded in the book of accounts as withdrawals. The applications of separate entity concept is necessary so that the financial position and the financial performance of the business can be measured properly. By applying this concept, you can objectively know if the business is really earning profits, or if it has the ability to do so. In this case, you will determine if your business is growing or experiencing liquidation: time period.

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Related Questions

Match the accounting terminology to the definitions.

Ā 

  1. Conservatism

  2. Materiality concept

  3. Disclosure principle

  4. Consistency principle

Ā 

Ā 

  1. A business should report the least favorable figures in the financial statement when two or more possible options are presented.

  2. A businessā€™s financial statement must report enough information for outsiders to make knowledgeable decisions.

  3. A business should use the same accounting methods and procedures from period to period.

  4. A company must perform strictly proper accounting only for items that are significant to the business's financial situation.

The Financial Accounting Standards Board has developed a conceptualframework for financial accounting and reporting. The FASB hasissued seven Statements of Financial Accounting Concepts.

These statements set forth objectives and fundamentals that will bethe basis for developing financial accounting and reportingstandards. The objectives identify the goals and purposes offinancial reporting. The fundamentals are the underlying conceptsof financial accounting concepts that guide the selection oftransactions, events, and circumstances to be accounted for; theirrecognition and measurement; and the means of summarizing andcommunicating them to interested parties.

The purpose of Statement of Financial Accounting Concepts No. 2,"Qualitative Characteristics of Accounting Information," is toexamine the characteristics that make accounting informationuseful. The characteristics or qualities of information discussedin Concepts No. 2 are the ingredients that make information usefuland are the qualities to be sought when accounting choices aremade.

What is the most important quality for accounting information asidentified in Statement of Financial Accounting Concepts No. 2?Explain why it is the most important.

1. An accounting concept rooted in history. When accounting was developed in the 14th and 15th centuries, some businesses had a very short life. For instance, a business might have been created for a ship to sail from Europe to North America and return with furs and other goods. After the goods were delivered and profits were distributed among those who financed the shipment, the business ceased to exist. In more recent centuries, businesses began to experience longer lives. Identify the accounting concept that is needed when accounting for businesses with long lives. Explain what this concept means and why it is necessary for modern day accounting.