What does the accrual basis concept state?

Transaction effects are reported in periods they relate to

What are the three characteristics of an expense?

Decreases economic benefits, decreases equity, not drawings

What are the three characteristics of a liability?

Past event, present obligation, future outflow of resources

What are the three characteristics of an income?

Increases economic benefits, increases equity, not capital

What does the period reporting concept state?

We can divide the entity's economic activity into periods

What does the monetary measurement concept state?

All items are recorded in dollar terms, in the same currency

What does the accounting entity concept state?

The business is separate from its owner and other entities

What does the historical cost concept state?

Assets are recorded at their original cost to the business

What are the three characteristics of an asset?

Past event, present control, future economic benefit

What does the going concern concept state?

The business intends to continue into the foreseeable future

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Accounting Concepts Review

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A quick review checking the definitions of some basic accounting concepts

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Questions 18

Answers

1
What does the accrual basis concept state?
All items are recorded in dollar terms, in the same currency
The business is separate from its owner and other entities
Transaction effects are reported in periods they relate to
Assets are recorded at their original cost to the business
2
Is buying a new delivery van an example of capital expenditure or revenue expenditure?
Revenue Expenditure
Capital Expenditure
3
What are the three characteristics of an expense?
Decreases economic benefits, decreases equity, not drawings
Past event, present control, future economic benefit
Past event, present obligation, future outflow of resources
Increases economic benefits, increases equity, not capital
4
What are the three characteristics of a liability?
Decreases economic benefits, decreases equity, not drawings
Increases economic benefits, increases equity, not capital
Past event, present obligation, future outflow of resources
Past event, present control, future economic benefit
5
What is the definition of equity?
Assets divided by liabilities
Assets plus liabilities
Assets minus liabilities
Assets - liabilities
6
What are the three characteristics of an income?
Past event, present obligation, future outflow of resources
Past event, present control, future economic benefit
Increases economic benefits, increases equity, not capital
Decreases economic benefits, decreases equity, not drawings
7
What does the period reporting concept state?
The business is separate from its owner and other entities
Transaction effects are reported in periods they relate to
We can divide the entity's economic activity into periods
The business intends to continue into the foreseeable future
8
What does the monetary measurement concept state?
All items are recorded in dollar terms, in the same currency
The business is separate from its owner and other entities
Transaction effects are reported in periods they relate to
Assets are recorded at their original cost to the business
9
What is included in an Statement of Financial Position?
Cash receipts, cash payments
Assets, liabilities, equity
Income, expenses, profit
10
Is buying petrol for a delivery van an example of capital expenditure or revenue expenditure?
Capital Expenditure
Revenue Expenditure
11
What does the accounting entity concept state?
We can divide the entity's economic activity into periods
The business intends to continue into the foreseeable future
The business is separate from its owner and other entities
Transaction effects are reported in periods they relate to
12
What is included in an Cash Budget?
Income, expenses, profit
Assets, liabilities, equity
Cash receipts, cash payments
13
What does the historical cost concept state?
Transaction effects are reported in periods they relate to
Assets are recorded at their original cost to the business
The business is separate from its owner and other entities
All items are recorded in dollar terms, in the same currency
14
What are the three characteristics of an asset?
Increases economic benefits, increases equity, not capital
Past event, present obligation, future outflow of resources
Past event, present control, future economic benefit
Decreases economic benefits, decreases equity, not drawings
15
What is included in an Income Statement?
Income, expenses, profit
Cash receipts, cash payments
Assets, liabilities, equity
16
What does the going concern concept state?
The business is separate from its owner and other entities
We can divide the entity's economic activity into periods
The business intends to continue into the foreseeable future
Transaction effects are reported in periods they relate to
17
Does revenue expenditure increase, decrease, or not change equity?
Decrease
Increase
No change
18
Does capital expenditure increase, decrease, or not change equity?
Increase
No change
Decrease

Accounting Concepts Review Flashcards | StudBud