Match each accounting concept or convention on the left with its correct practical accounting application on the right.
- Accrual ConceptRevenues and expenses are recognized when earned or incurred, regardless of when cash is received or paid.
- Materiality ConceptItems of minor monetary significance may be expensed immediately rather than capitalized as non-current assets.
- Periodicity ConceptThe continuous life of an enterprise is divided into regular time intervals for periodic performance evaluation.
- Historical Cost ConceptAssets are recorded in accounting books at their original acquisition price rather than current market value.
Answer
Accrual Concept pairs with recognizing revenue/expenses when earned or incurred regardless of cash flow; Materiality Concept pairs with expensing low-value items immediately; Periodicity Concept pairs with dividing the business life into regular time intervals; Historical Cost Concept pairs with recording assets at original acquisition price.
Each concept aligns directly with its governing practical accounting treatment: Accrual recognizes revenue and expenses when earned or incurred; Materiality allows immediate expensing of low-value assets; Periodicity divides ongoing operations into uniform reporting periods; and Historical Cost records assets at acquisition cost.
Step-by-Step Solution
Key Concept
Accounting Concepts and Conventions
Estimated Time:1m 30s