Question

Foundational accounting principles and qualitative characteristics - matching
Listed below are several foundational accounting principles and qualitative characteristics. Note that each item may be used more than once or not at all.
       Economic entity assumption       Matching principle
       Going concern assumption       Full disclosure principle
       Monetary unit assumption       Relevance
       Periodicity assumption       Control
       Historical cost principle       Comparability
       Revenue recognition principle
Materiality       Representational faithfulness

Please write the word that best reflects the answer.
           1.       Ignoring inflation when preparing financial statements.
           2.       Deciding which company to include in the Consolidated Financial
Statements.
           3.       Accounting information reflects the economic substance of the event.
           4.       Presentation of timely information with predictive and feedback value
which makes a difference to the users.
           5.       Recording Bad Debts Expense each year based on a % of sales.
           6.       Changing prior year financial statements when the depreciation policy
is changed from Straight line to declining balance.

           7.       Valuing assets at amounts originally paid for them and ignoring
change in market values
           8.       The affairs of the business are distinguished from those of its owners.
           9.       Any material events that occur after year end but before the statements
are released are documented in the Notes to the Financial Statements.
           10.       Refers to the dollar amount that makes a difference in the users’ decisions
           11.       Includes neutrality, completeness, and freedom from material error.
           12.       During the lifetime of an entity, accountants produce financial statements at arbitray points in time in accordance with _____.
           13.       The reason accountants use Accrual accounting.
           14.       What principle is violated when the shipping costs of inventory are
directly recorded as part of cost of goods sold and are never recorded as
part of inventory.

Answer 1

1. Monetary unit assumption
2. Control - The decision for which of the companies is to be included is based on the Control concept and preparation of consolidated financial statements is based on economic entity assumption.
3. Representational faithfulness
4. Relevance - For accounting information to be relevant, it must have confirmatory and predictive values.
5. Matching principle
6. Comparability
7. Historical cost principle
8. Economic entity assumption
9. Full disclosure principle
10. Relevance
11. Representational faithfulness
12. Periodicity assumption
13. Matching principle
14. Revenue recognition principle. It is an error and it means that information is not error-free and also the principle of representational faithfulness is violated.