The Measurement Principle, Also Called the Cost Principle

question 13

Multiple Choice

The measurement principle, also called the cost principle:

• A) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.
• B) Prescribes that a company record the expenses it incurred to generate the revenue reported.
• C) Prescribes that a company report the details behind financial statements that would impact users' decisions.
• D) Provides guidance on when a company must recognize revenue.
• E) Prescribes that accounting information is based on actual cost.

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Definitions:

Increase in Supply

A situation where the quantity of a good or service that producers are willing to supply at a given price rises.

Increase in Demand

A situation where consumers are willing and able to purchase more of a good or service at each possible price, often depicted by a rightward shift in the demand curve.

Decrease

A reduction in size, number, value, or extent.

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, leading to market balance.