True or False: The consistency assumption allows companies to change accounting policies frequently.

False. The consistency assumption requires that accounting policies remain consistent from one period to another.

What does the accrual assumption dictate regarding the recording of revenues and expenses?

Revenues and expenses should be recorded when they are earned or incurred, not necessarily when cash is exchanged.

Fill in the blank: Accounting policies encompass the principles and methods used by organizations to prepare their ___ .

Financial statements

True or False: Organizations must follow a universal list of accounting policies.

False. There is no universal list of accounting policies due to varying operational circumstances.

What are some areas where organizations may adopt different accounting policies?

Methods of depreciation, treatment of inventories, and valuation of investments.

Fill in the blank: The principle of prudence in accounting means that profits are recognized only when ___ and provisions are made for known liabilities.

Earned

Fill in the blank: Materiality in accounting requires the disclosure of ___ items that could influence user decisions.

Material

True or False: Changes in accounting policies that do not affect the current period do not need to be disclosed.

False. Changes in policies that impact future periods should also be disclosed.

What is the significance of full disclosure of significant accounting policies in financial statements?

It is essential for user understanding and allows users to comprehend the impact of accounting policies on financial results.

Fill in the blank: The diversity of accounting principles persists due to the unique ___ organizations face.

Situations

True or False: The straight-line method and double-declining balance method are examples of different accounting practices for depreciation.

True.

Fill in the blank: Financial statements should disclose material items, such as significant pending ___ .

Lawsuits