E126 Accounting concepts Match each of the following stateme

E1-26 Accounting concepts Match each of the following statements with the appropriate accounting concept. Some concepts may be used more than once, while others may not be used at all. Use the notations shown to indicate the appropriate accounting concept. Notation Accounting Concept Accounting period concept Adequate disclosure concept Business entity concept Cost concept Going concern concept Matching concept Objectivity concept Unit of measure concept Statements 1. Assume that a business will continue forever. 2. Material litigation involving the corporation is described in a note. 3. Monthly utilities costs are reported as expenses along with the monthly revenues. 4. Personal transactions of owners are kept separate from the business. 5. This concept supports relying on an independent actuary (statistician), rather than the chief operating officer of the corporation, to estimate a pension liability 6. Changes in the use of accounting methods from one period to the next are described in the notes to the financial statements. 7. Land worth $800,000 is reported at its original purchase price of $220,000. 8. This concept justifies recording only transactions that are expressed in dollars. 9. If this concept was ignored, the confidence of users in the financial statements could not be maintained. 10. The changes in financial condition are reported at the end of the month.

Solution

1. Assume that a business will continue forever. Going Concern Concept 2. Material litigation involving the corporation is described in a note. Adequate Disclosure Concept 3. Monthly utilities costs are reported as expenses along with the monthly revenues. Matching Concept 4. Personal transactions of owners are kept separate from the business. Business Entity Concept 5. This concept supports relying on an independent accuracy (statistician), rather than the chief operating officer of the corporation, to estimate a pension liability. Objectivity Concept 6. Changes in the use of accounting methods from one period to the next are described in the notes to the financial statements. Adequate Disclosure Concept 7. Land worth $800,000 is reported at its original price of $220,000. Cost Concept 8. This concept justifies recording only transactions that are expressed in dollars Units of Measurement Concept 9. If this concept was ignored the confidence of users in teh financial statements could not be maintained. Adequate Disclosure Concept 10. The changes in financial condition are reported at the end of the month Accounting Period Concept