Identification of Foundational Accounting Principles

question 53

Essay

Identification of foundational accounting principles
State the accounting principle or assumption that is most applicable in the following situations:
1. A company prepares consolidated financial statements for a subsidiary that it owns.
2. The decision to remove an asset from the balance sheet
3. A large sale on account is not recognized as revenue because collectibility is an issue.
4. Disclosure of the liability from a lawsuit in the financial statements
5. Preparation of monthly financial statements
6. Using the Canadian dollar in financial statements
7. An energy company includes detailed information about its reserves in its notes to the financial statements.

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Definitions:

Spending Variance

The difference between the actual amount spent and the budgeted amount for a particular cost or expense category.

Equipment Depreciation

The systematic allocation of the cost of physical assets used in production over their useful lives.

Spending Variance

The difference between the actual amount spent and the budgeted amount for a particular period or project.

Other Expenses

Costs not directly related to the primary business activities, such as interest expense or losses from asset sales.