Question

The Captain Kirk hotel is part of a large global company and they round dollar amounts in their financial statements to the nearest $1,000. Which accounting principle or concept justifies this action?

		Time period concept
		Economic entity concept
		Materiality constraint
		Going concern concept

Which of the following is considered an external user?

		Club Manager
		Rooms Director
		Auditing Service
		Bellhop

Which of the following items would fall under the definition of an asset?

		Land
		Gift Certificates
		Common Stock
		Contracts

If Mario paid $800 in utility expense last week, how should he reflect this in his books?

		Utility expense increased by $800, cash decreased by $800
		Utility expense decreased by $800, cash decreased by $800
		Liabilities increased by $800, cash increased by $800
		Liabilities increased by $800, cash decreased by $800

Answer 1

Part 1) OPTION C----- Materiality constraint

Materiality principle decides whether transactions hold significant amount to be recorded in financial statements or not. Rounding off the value relates with materiality concept.

Part 2) OPTION D----- Bellhop

External users are those who do not manages the business entity. Hence, all other options are internal users

Part 3)OPTION C---- Common Stock

Common stock is shareholders equity, it is not an asset.

Part 4)OPTION A

Utility expenses paid in cash would increase utility expense by $800 and decrease in cash by $800.