Apr 14, 2016
Finance English practice: Unit 8 — Accounting Assumptions and Principles
- Complete the sentences below. Use the key words if necessary.
- Assumptions
key words
When writing accounts and financial statements, accountants have to follow a number of assumptions, principles and conventions. An is something that is generally accepted as being true.
The is that a business is an accounting unit separate from its owners, creditors and managers, and their assets. These people can all change, but the business continues as before.
The states that the economic life of the business can be divided into (artificial) time periods such as the , or a quarter of it.
The says that a business will continue into the future, so the current market value of its assets is not important.
The is that all financial transactions are in a single monetary unit or currency. Companies with - that is, other companies that they own — in different countries have to convert their results into one currency in for the whole group of companies.
Principles
key words
The states that financial reporting must include all significant information: anything that makes a difference to the users of financial statements.
The , however, says that very small and unimportant amounts do not need to be shown.
The is that where different accounting methods are possible, you choose the one that is least likely to overstate or over-estimate assets or income.
The says that accounts should be based on facts and not on personal opinions or feelings. Accounts, therefore, should be : it should be possible for internal and external auditors to show that they are true. This isn't always possible, however: depreciation or amortization, and provisions for bad debts, for example, are necessarily — based on opinions.
The is that revenue is recognized in the accounting period in which it is earned. This means the revenue is recorded when a service is provided or goods delivered, not when they are paid for.
The , which is related to revenue recognition, states that each cost or expense related to revenue earned must be recorded in the same accounting period as the revenue it helped to earn.
- Assumptions
- British English or American English?
- financial year
- British English
- American English
- fiscal year
- American English
- British English
- financial year
- Match the accounting assumptions and principles to the activities they prevent.
- Conservatism principle: . . .
- valuing assets and estimating future revenue at the highest possible figures.
- publishing financial statements for a 15-month period, because this will show better profits.
- listing the owners' personal assets in a company's financial statements.
- waiting until customers pay before recording expenses.
- showing a profit divided into US dollars, euros, etc.
- waiting until customers pay before recording revenue.
- Matching principle: . . .
- publishing financial statements for a 15-month period, because this will show better profits.
- listing the owners' personal assets in a company's financial statements.
- waiting until customers pay before recording revenue.
- valuing assets and estimating future revenue at the highest possible figures.
- showing a profit divided into US dollars, euros, etc.
- waiting until customers pay before recording expenses.
- Separate entity assumption: . . .
- listing the owners' personal assets in a company's financial statements.
- showing a profit divided into US dollars, euros, etc.
- valuing assets and estimating future revenue at the highest possible figures.
- waiting until customers pay before recording expenses.
- publishing financial statements for a 15-month period, because this will show better profits.
- waiting until customers pay before recording revenue.
- Revenue recognition principle: . . .
- publishing financial statements for a 15-month period, because this will show better profits.
- listing the owners' personal assets in a company's financial statements.
- waiting until customers pay before recording revenue.
- showing a profit divided into US dollars, euros, etc.
- waiting until customers pay before recording expenses.
- valuing assets and estimating future revenue at the highest possible figures.
- Time-period assumption: . . .
- showing a profit divided into US dollars, euros, etc.
- listing the owners' personal assets in a company's financial statements.
- waiting until customers pay before recording revenue.
- valuing assets and estimating future revenue at the highest possible figures.
- waiting until customers pay before recording expenses.
- publishing financial statements for a 15-month period, because this will show better profits.
- Unit-of-measure assumption: . . .
- valuing assets and estimating future revenue at the highest possible figures.
- waiting until customers pay before recording revenue.
- listing the owners' personal assets in a company's financial statements.
- publishing financial statements for a 15-month period, because this will show better profits.
- waiting until customers pay before recording expenses.
- showing a profit divided into US dollars, euros, etc.
- Conservatism principle: . . .
- Complete the sentences.
- A company's . . . does not have to begin on 1 January, like the calendar year.
- time-period assumption
- unit-of-measure assumption
- financial year
- In an American company owns a company in Britain, this is a . . . .
- principal
- subsidiary
- extra
- Multinationals, with companies in lots of different countries, combine all their results in one set of . . . .
- consolidated financial statements
- unit-of-measure assumptions
- assumptions
- Every entry in a company's accounts must be . . . : there must be a document available showing that it is true.
- verifiable
- subsidiary
- principal
- Both the internal and external auditors have to . . . the accounts.
- confirm
- verify
- test
- Companies have to . . . all relevant financial information in their annual reports.
- discover
- disclose
- conceal
- Despite the . . . principle, accountants have to make some subjective judgments.
- neutrality
- objectivity
- subjectivity
- Even if a company is going through a bad period, for accounting purposes we . . . it's a going concern.
- assume
- think
- deduce
- A company's . . . does not have to begin on 1 January, like the calendar year.
© 2020 DrillPal.com