Accounting Theory

Which one best describes the Accrual theory?

• It requires an entity to use the same accounting methods every period.

• Transactions are to be recorded at its original cost initially.

• Income earned and expenses incurred has to be recorded regardless of whether it is paid or received.

• Transactions are recorded based on evidence that are reliable

The going concern theory states that a business entity is assumed to operate _______________ .

Which one best describes Matching theory?

• Expenses incurred in a given period must be matched against income earned in the same accounting period.

• Transactions are recorded based on evidence that are reliable

• Accounting treatment chosen should be one that least overstates assets and profits.

• Income earned has to be recorded regardless of whether it is received.

Which accounting theory states that the talent of an employee cannot be recorded in the balance sheet?

• Matching theory

• Materiality theory

• Monetary theory

• Historical cost theory

Which one best describes the Accounting period theory?

• It states that the life of a business must be divided into regular time period.

• It states that a business entitiy is assumed to operate indefinitely.

• It states that only transactions that can be quantified can be recorded

• The business and the owners are two separate entities.

Which accounting theory requires you to recorded withdrawals of assets for personal use as drawings?

• Accounting period theory

• Accounting entity theory

• Monetary theory

• Matching theory

Which accounting theory requires inventory to be valued at the lower of cost or net realizable value?

• Going concern theory

• Matching theory

• Consistency theory

• Prudence theory

Which one best describes the Objectivity theory?

• Transactions are recorded based on evidence that are reliable

• Transactions are recorded based on the latest evidence

• Transactions are recorded based on an estimated guess

• Transactions are recorded based on the

Which accounting theory requires you to stick to the same depreciation method throughout the asset's useful life?

• Prudence theory

• Accrual theory

• Objectivity theory

• Consistency theory

Which one best describes historical cost theory?

• Transactions are to be recorded at the original cost initially

• Transactions are to be recorded at the lowest cost intiially

• Transactions are to be recorded at the best price initially

• Transactions are to be recorded at the highest cost initially