The Accounting Principle That Requires That the Cost Flow Assumption

question 175

Multiple Choice

The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is

• A)called the matching principle.
• B)called the consistency principle.
• C)nonexistent; that is, there is no such accounting requirement.
• D)called the physical flow assumption.

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Definitions:

Net Income

Net income is the total amount of profit a company makes after all expenses, taxes, and costs have been subtracted from its total revenue.

Equity Method

An accounting technique used to record investments in other companies where the investor has significant influence but not full control, typically between 20% and 50% ownership.

Dividends

Distributions of earnings given by a business to its shareholders, often as profit sharing.

Equity Method

An accounting technique used by companies to assess the profits earned by their investments in other companies, where the investment income is proportional to the equity held.