In Matters of Doubt and Great Uncertainty, Accounting Issues Should

question 76

Multiple Choice

In matters of doubt and great uncertainty, accounting issues should be resolved by choosing the alternative that has the least favorable effect on net income, assets, and owners' equity. This guidance comes from

• A) the cost constraint.
• B) the industry practices constraint.
• C) prudence or conservatism.
• D) the full disclosure principle.

---

Definitions:

Depletion Expense

The systematic allocation of the cost of natural resources over their expected productive life.

Drilling Rights

Legal permissions granted to an individual or company to explore and extract resources from the land.

Adjusting Entry

At the close of an accounting cycle, records are made in the accounting books to apportion earnings and expenditures to the actual period of occurrence.

Gallons

A unit of volume for liquid measurements in the United States, equivalent to 3.785 liters.