One of the Accounting Concepts Upon Which Adjustments for Prepayments

question 15

Multiple Choice

One of the accounting concepts upon which adjustments for prepayments and accruals are based is:

• A)expense recognition.
• B)cost.
• C)monetary unit.
• D)economic entity.

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Definitions:

Fair Market Value

The estimated price at which an asset or service would change hands between a willing buyer and seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Carrying Value

The original cost of an asset or liability adjusted for depreciation, amortization, or impairment, reflecting its current book value.

Journal Entry

A record in the accounting ledger that shows a business transaction, involving a debit to one or more accounts and a credit to another to balance.

Consolidated Financial Statements

Financial reports that display the economic condition, operational outcomes, and cash movements of a parent company and its subsidiary companies as one consolidated entity.