Practice Important Accounting Conventions (15.4) - Accounting Principles and Concepts

Practice: Important Accounting Conventions

Lesson 15.4Accounting Principles and Concepts

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8 questions

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6 sample questions

Question 1.
Explain the conservatism principle in accounting.
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Think about how this principle protects stakeholders.
Question 2.
What does consistency in accounting ensure?
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Consider why changes in methods could be problematic.
3Question 3.
What does the conservatism principle require companies to do?
- Recognize all profits immediately
- Anticipate no profit but provide for potential losses
- Ignore potential losses
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Think about how businesses protect themselves.
4Question 4.
True or False: The consistency principle allows companies to change their accounting methods as needed without any consequences.
- True
- False
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Consider the impacts of changing methods on comparability.
Question 5.
A company has been using straight-line depreciation for its assets. They are considering switching to declining balance depreciation. What steps should they take to comply with the consistency principle?
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Think about how changes require transparency and communication.
Question 6.
When assessing whether to report an expense, how can a company determine if the expense is material?
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Consider the potential decision-making impact of the number on stakeholders.

4 more questions in this section. Enroll free to practise them all.