The Accounting Principle That Requires That the Cost Flow Assumption

question 255

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 accounting requirement.
• D) called the physical flow assumption.

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Definitions:

Consolidated Financial Statements

Financial reports that aggregate the financial position and operating results of a parent company and its subsidiaries, presenting them as a single economic entity.

Residual Value

The estimated value that an asset will have at the end of its useful life.

Gross Profit

The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.

Consolidated Net Income

The total net income of a parent company and its subsidiaries, after the elimination of inter-company transactions and balances.