Identify which accounting principle applies to the following situations On 12/31

Question

Identify which accounting principle applies to the following situations On 12/31/16 rent revenue is recorded as a revenue when it had been recorded as an un-earned rent revenue. An adjustment is made to record interest due on a note payable even though no cash had been paid. The fact that a pending law suit may cause a financial loss to the company is recorded as a foot note to the financial statements. A small expense report is not recorded in the current accounting period because it is not turned in until the next fiscal year.

Explanation / Answer

9./

A./

REVENUE RECOGNITION PRINCIPLE- AS THE RENT REVENUE EARNED IN THE FINANCIAL YEAR 2016 IT WILL BE RECORDED IN THE INCOME STATEMENT OF YEAR 2016 NO MATTER WHEN THE ACTUAL CASH IS RECEIVED.

B./

MATCHING PRINCIPLE- AS THE ACCOUNTING IS MADE BY ACCURAL BASSIS ALL EXPENSE IS RECORDED IN THE PERIOD FOR WHICH IT IS INCURRED NOT WHEN IT ACTUALLY PAID

C./

CONSERVATISM PRINCIPLE- AS THE COMPANY HAS TO PROVIDE FOR ALL POSSIBLE LOSSES, BUT NO POSSIBLE INCOME CAN BE RECORDED.

D./

MATERIALITY PRINCIPLE- ALL MATERIAL ITEM IN TERMS OF AMOUNT IS RECORDED IN THE FINANCIAL STATEMENT. THE MATERIALITY WILL DIFFER FROM ORGAISTION TO ORGAISATION.

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.