Accounting Concepts Quiz! Trivia Knowledge

If there are no liabilities, it means that the company does not owe any debts or obligations to external parties. In this case, all the company's assets would be owned by the shareholders or owners of the company, which is represented by the capital. Therefore, if there are no liabilities, the total value of assets would indeed be equal to the capital.

Consistency is the concept that states that the same accounting methods and principles should be applied consistently from one accounting period to another. This ensures that financial statements are comparable and allows users to make meaningful comparisons and decisions based on the information provided. By using consistent accounting methods, companies can avoid misleading or confusing financial statements and provide a clear and accurate representation of their financial performance and position over time.

According to the money measurement concept, only those transactions and events that can be measured in monetary terms are recorded in the books of accounts. This means that any event or transaction that cannot be expressed in monetary value will not be recorded. The concept ensures that only quantifiable and measurable information is included in the financial statements, providing a more objective and reliable representation of the organization's financial position and performance.

Accounting period is the correct answer because this concept states that the economic activities of an entity should be divided into specific time periods, usually one year, in order to provide meaningful and comparable financial information. This allows for the measurement and reporting of financial performance and the assessment of the entity's financial position at regular intervals. By following the accounting period concept, financial statements can be prepared and presented in a systematic and consistent manner, enabling users to make informed decisions based on the entity's financial information.

The accrual concept is based on the matching concept. This means that revenues and expenses are recognized in the accounting period in which they are earned or incurred, regardless of when the cash is received or paid. The matching concept ensures that the expenses incurred to generate revenue are matched with the corresponding revenue in the same period, providing a more accurate representation of the financial performance of a business. This concept helps in determining the true profitability of a business by considering both the revenues and expenses associated with a particular accounting period.

According to the going concern concept, a business is viewed as having an indefinite life. This means that the business is expected to continue operating in the foreseeable future, without any intention of liquidation or cessation of operations. The concept assumes that the business will continue to generate revenue, incur expenses, and fulfill its obligations. It is based on the belief that the business will be able to meet its financial commitments and achieve its objectives in the long term. Therefore, the correct answer is an indefinite life.

The correct answer is "Provision is made for bad and doubtful debts." In convention conservatism, it is customary to make provisions for bad and doubtful debts to account for potential losses in the future. This ensures that the financial statements reflect a more realistic and conservative view of the company's financial position. Making provisions for bad debts helps to anticipate potential non-payment by customers and allows for a more accurate estimation of the company's assets and liabilities.

The matching concept is the principle in accounting that states that expenses should be recognized in the same period as the revenues they help generate. This concept ensures that the financial statements accurately reflect the expenses incurred to generate the revenues reported. By matching expenses with the related revenues, it provides a more accurate representation of the profitability and financial performance of a company. This principle helps in making informed decisions and assessing the overall financial health of the business.

The matching concept is a fundamental accounting principle that states that expenses should be matched with the revenues they generate in the same accounting period. This means that income is measured based on the matching of expenses incurred to generate that income. By matching expenses and revenues, the matching concept ensures that the financial statements accurately reflect the financial performance of a business for a given period. Therefore, income is measured on the basis of the matching concept.

The going concern assumption is a fundamental accounting assumption that assumes a company will continue to operate in the foreseeable future. This assumption allows accountants to prepare financial statements under the assumption that the company will not liquidate or cease operations. Consistency, accrual, and materiality are also fundamental accounting assumptions.