A cash book with cash bank and discount column is commonly referred as The prudence concept. Under the prudence concept, do not overestimate the amount of revenues recognized or underestimate the amount of expenses.
The concept of 'separate entity' is applicable to which of the following types of businesses?
Ownership in business entities can be a sole proprietorship, partnership, or corporation. From the accounting perspective and its purpose these types of business are considered separate entities from their owners. The corporation is only one considered as a separate legal entity.
Does prudence concept allow a business to build substantially higher reserves or provisions than that are actually required?
Prudence is the application of caution in the exercise of the judgements needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated. However, the exercise of prudence does not allow, for example, the creation of hidden reserves or excessive provisions, the deliberate understatement of assets or income, or the deliberate overstatement of liabilities or expenses, because the financial statements would not be neutral and therefore, not have the quality of reliability.
The revenue recognition principle dictates that all types of incomes should be recorded or recognized when
The revenue recognition principle dictates that all types of incomes should be recorded or recognized when they are earned. The revenue recognition principle, a combination of accrual accounting and the matching principle, stipulates that revenues are recognized when realized and earned, not necessarily when received.
The matching concept matches which of the following?