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.

---

Definitions:

Functional Currency

The primary currency used by a business for its accounting, often associated with its primary economic environment.

Amortization

The method of slowly depreciating the initial value of an intangible asset over its lifetime.

Exchange Rates

The price at which one currency can be exchanged for another currency.

Amortization Expense

The periodic reduction in the book value of an intangible asset over its useful life.