Match the concept or assumption to the area of theory that c

Match the concept or assumption to the area of theory that covers it. Click and drag the assumption/concept on the right to match the heading on the left. major accounting assumptions accrual basis and periodicity other basic accounting concepts articulation major principles materialism modifying concepts matching qualitative characteristics neutrality

Solution

(1) Major accounting assumptions – accrual basia and periodicity

Assumption#1. Accounting Entity.

Assumption#2. Going Concern.

Assumption#3. Measurement and Units of Measure.

Assumption#4. Periodicity.

(2) Other basic accounting concepts – Materialism

There are a number of conceptual issues that one must understand in order to develop a firm foundation of how accounting works. These basic accounting concepts are as follows:

Accruals concept

Conservatism concept

Consistency concept

Economic entity concept

Going concern concept

Matching concept

Materiality concept

(3) Major principles – Matching

Following are four underlying principles in accounting

(4) Modifying concepts – articulation

Two basic conceptual frameworks exist in accounting theory when it comes to the relationship between the balance sheet and the income statement. Articulation is an expression of how well the information on the balance sheet corresponds with the information found a company\'s income statement. A non-articulated approach is less concerned with this level of correspondence.

(5) Qualitative charateristics – neutrality

Method under which revenues are recognized in the period they become available and measurable, and expenditures are recognized in the period the associated liability is incurred. Most government accounting follows this method. Also called modified cash basis accounting.

PRIMARY QUALITATIVE CHARACTERISTICS of Accounting Information

The primary decision-specific qualities that make accounting information useful are relevance and reliability.

(a) Relevance: To make a difference in the decision process, information must possess predictive value and/or feedback value. Timeliness also is an important component of relevance.

(b) Reliability: Reliability is the extent to which information is verifiable, representationally faithful, and neutral.