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Each of the Following Statements Is Justified by a Concept

Question 65

Matching

Each of the following statements is justified by a concept or convention of accounting. Match each statement corresponding to the concept or convention involved.

Premises:

Responses:

This convention best enhances comparability of financial statements between years.

Consistency

A merger agreed on just after the balance sheet date nevertheless is reported in the notes to the financial statements.

Materiality

A company forgoes hiring another full-time accountant, which would add only slightly to the financial statements' accuracy.

Conservatism

A company uses lower-of-cost-or-market to value inventory.

Full disclosure

A large company rounds its financial statement figures to the nearest $10,000.

Cost-benefit

Premises:

This convention best enhances comparability of financial statements between years.

A merger agreed on just after the balance sheet date nevertheless is reported in the notes to the financial statements.

A company forgoes hiring another full-time accountant, which would add only slightly to the financial statements' accuracy.

A company uses lower-of-cost-or-market to value inventory.

A large company rounds its financial statement figures to the nearest $10,000.

Responses:

Consistency

Materiality

Conservatism

Full disclosure

Cost-benefit

Correct Answer:

Premises:

Responses:

This convention best enhances comparability of financial statements between years.

A merger agreed on just after the balance sheet date nevertheless is reported in the notes to the financial statements.

A company forgoes hiring another full-time accountant, which would add only slightly to the financial statements' accuracy.

A company uses lower-of-cost-or-market to value inventory.

A large company rounds its financial statement figures to the nearest $10,000.

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