Which of the following is a TRUE statement?
A)Conservatism requires accountants to intentionally understate assets.
B)Separate entity assumption in accounting requires that the financial activities of the owners of a company be reported on the company's balance sheet.
C)The cost principle states that recording activities at cost will result in the balance sheet representing the true value of the company.
D)A transaction is recorded in accounting if it has a measurable financial effect on the assets,liabilities or stockholders' equity of a business.

Question

Quizplus · Accepted Answer

Option D is the correct answer as it is a true statement in accounting. Transactions are recorded in accounting only if they have a measurable financial effect on the assets, liabilities or stockholders' equity of a business. Options A, B, and C are all false statements. Conservatism requires accountants to intentionally overstate liabilities and expenses, not understate assets. Separate entity assumption requires that the financial activities of the owners of a company be reported separately from the company's financial activities. The cost principle states that assets are recorded at their historical cost, not that the balance sheet represents the true value of the company.

Which of the Following Is a TRUE Statement