We have covered in great details various Accounting Principles. Now it is the time to do some quiz about these accounting concepts to evaluate your understanding. We have made them in MCQs (Mutiple Choice Question format) to allow you make…
Comparability is also an important accounting principle. It requires that financial information must be comparable from one accounting period to another. But, this is possible only if the entity is using the same accounting policies from one period to another. Ratio…
Consistency Concept has fundamental importance in the preparation of financial statements. According to this, an entity must continue to use the same accounting policies from one period to another and so on. This ensures consistency of accounting policies and makes…
Understandability concept is one of the qualitative accounting principles. This concept requires that the transactions and events should be presented in financial statements in such a way that users of it can easily read and understand it. A user here…
Prudence concept is a fundamental accounting principle which requires the accountant to record the expenses and liabilities as soon as possible. On the other hand, prudence principle requires accountant to record revenues only when they are assured or actually realized. It is also called conservatism principle. …
In order to present true and fair view of the financial statements, accountants need to reflect transactions over the basis of economic substance rather than over the legal form. Substance over Form is a major accounting principle and its applicability…
Materiality is one of the main accounting principles and has a vast effect in the preparation of the financial statements. In order to judge whether the information is material or not, one has to judge its effect over the financial…
Relevance and reliability are the two main accounting principles. By relevance we mean the information available for a given set of financial figures in order to accommodate the user of the financial statements in making an informed decision. On the…
Matching principle is one of the fundamental accounting concepts and has great importance as well. It emphasizes that expenses should be recorded in the period in which the related revenues are earned. The application of this principle invalidates the cash…
Accounting transactions are recorded on the date when they incur. So, they remain reflected on the value at which we have recorded them. So, a transaction recorded for sales revenue in the last 5 years ago will stay be there…