Question

TRUE OR FALSE?

1. Consistent with the going concern concept, land will be revalued for increases or decreases in market value.

2. The accrual basis of accounting is designed to avoid misleading income statement results that could otherwise result from the timing of cash receipts and payments.

3. Accrual accounting does NOT require that the accounting records be updated prior to preparing financial statements

4. Income that cannot be associated definitely with operations, such as a gain from the sale of a fixed asset, is listed as Other Income on the multiple-step income statement.

Answer 1

1) False, Going concern is a concept which assumes that the business is going to continue for a foreseable future.

assets are valued at historical cost which differs from the value that would be realised if assets were liquidated because the ongoing operations has the ability to earn profits which adds value to the business

2) True, Accrual concept states that the revenues are to be recognised when they are earned and not when they are actually recieved and similarly expenses have to be recorded when they are incurred not when they are actually paid.

3) False, under the accrual basis, accounting records are updated prior to preparing the financials

4) True, Incomes which cannot be associated with operations has to be disclosed as other income