B Accounting principles, concepts and qualitative characteristics

The going concern assumption means that the financial statements are prepared on the basis that the entity:

• 1 Is making a profit in every period
• 2 Will be sold within a year
• 3 Will continue to operate for the foreseeable future
• 4 Has no debts

Which of these is a fundamental qualitative characteristic of useful financial information?

• 1 Understandability
• 2 Comparability
• 3 Relevance
• 4 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?

• 1 Prudence
• 2 Going concern
• 3 Duality
• 4 Materiality

Recording a transaction according to its economic reality, and not just its legal form, is an example of:

• 1 Offsetting
• 2 Historical cost
• 3 Substance over form
• 4 Consistency