B Accounting principles, concepts and qualitative characteristics

Written by Fahad Mirza (ACCA)

ACCA · Financial Accounting · 4 questions

Name: ____________________ Date: ____________

The going concern assumption means that the financial statements are prepared on the basis that the entity:
- A Is making a profit in every period
- B Will be sold within a year
- C Will continue to operate for the foreseeable future
- D Has no debts
Which of these is a fundamental qualitative characteristic of useful financial information?
- A Understandability
- B Comparability
- C Relevance
- D Timeliness
A business with annual revenue of $80 million buys a stapler for $12 and records it as an expense, not as a non-current asset. Which concept does this show?
- A Prudence
- B Going concern
- C Duality
- D Materiality
Recording a transaction according to its economic reality, and not just its legal form, is an example of:
- A Offsetting
- B Historical cost
- C Substance over form
- D Consistency

Answer key

1. C, 2. C, 3. D, 4. C

Going concern assumes there is no intention or need to liquidate or stop trading.
Relevance and faithful representation are fundamental. Comparability, verifiability, timeliness and understandability are enhancing.
The amount is too small to influence a user's decision, so it is treated as an expense.
Substance over form means showing what really happened.