In accounting, the concept of 'going concern' assumes that a business will ___ until evidence suggests otherwise.

Continue operating indefinitely

True or False: The consistency concept requires that accounting practices remain unchanged from one period to another.

True

The prudence concept in accounting emphasizes recognizing potential ___ while deferring the recognition of ___ until they are realized.

Losses; profits

Fill in the blank: According to the matching concept, income should be matched with the ___ of a given accounting period.

Expenses

What does the business entity concept state about transactions associated with a business?

They must be separately recorded from those of its owners or other businesses.

The money measurement concept dictates that only ___ transactions will be recorded in accounting.

Financial

According to the realization concept, revenue is recognized only when it is ___.

Legally realized

True or False: The full disclosure concept allows for omitting relevant information from financial statements if it benefits the company.

False; all relevant information must be disclosed.

The dual aspect concept indicates that every transaction affects both ___ and ___ of a business.

Assets; liabilities

Fill in the blank: The cost concept records assets at their original ___, regardless of market changes.

Cost

What is the primary purpose of accounting conventions?

To ensure consistency in financial reporting when clear guidelines are lacking.

True or False: The materiality principle allows for the inclusion of all insignificant details in financial statements.

False; only material facts should be included.

Explain the concept of conservatism in accounting.

It advises recognizing all potential losses while deferring the recognition of profits until they are realized.

What does the accounting period concept involve?

Dividing the indefinite life of an organization into shorter, typically equal time periods for reporting.

In the context of accounting, what is meant by the term 'objectivity'?

It refers to being unbiased and ensuring that accounting measurements are based on verifiable evidence.

Fill in the blank: The accounting equation states that ___ = Liabilities + Stakeholders’ equity.

Assets

What is the significance of the matching concept in accounting?

It ensures that income is recorded in the same period as the expenses incurred to generate that income.

According to the consistency convention, changes in accounting policies must be ___ and their effects explained.

Disclosed

True or False: The financial statement primarily serves to provide a detailed account of individual transactions.

False; it summarizes financial transactions over a specific period.

What does the accounting term 'accrual accounting' refer to?

Recording income when earned and expenses when incurred, regardless of cash flow.

Fill in the blank: The concept of dual aspect is fundamental to the ___ system of bookkeeping.

Double-entry

Identify the main accounting method preferred by small businesses for its simplicity.

Cash accounting

Explain the term 'materiality' in the context of financial reporting.

It emphasizes the importance of including only significant financial information that could influence user decisions.

Fill in the blank: The cash flow statement shows the balance between cash ___ and cash ___ incurred by a business.

Earned; expenditure

True or False: The accounting equation must always balance, meaning total assets should equal total liabilities and equity.

True

What role do accounting methods play in financial reporting?

They determine how transactions are recorded, either on a cash basis or an accrual basis.

Fill in the blank: The accounting convention of ___ requires that significant information be disclosed to financial statement users.

Full disclosure

What is the effect of the going concern concept on asset valuation?

It allows for the valuation of assets based on the assumption that the business will continue to operate.

Identify the accounting principle that guides the treatment of profits and losses in financial statements.

Conservatism

Fill in the blank: All financial transactions must be expressed in ___ terms according to the money measurement concept.

Monetary

What is the purpose of the accounting equation?

To show that a company's assets are financed by liabilities and equity.

Explain the difference between fixed and current assets.

Current assets are expected to be used within one year, while fixed assets provide benefits over a longer period.