The Accounting Principle That Requires Accounting Information to Be Based

question 125

Multiple Choice

The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the:

• A) Accounting equation.
• B) Cost principle.
• C) Going-concern assumption.
• D) Realization principle.
• E) Business entity assumption.

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Definitions:

Adjusting Entry

An accounting entry made in the books at the end of an accounting period to allocate income and expenditure to the correct period.

General Ledger

A complete record of all financial transactions over the life of a company, used to compile financial statements.

Accounting Cycle

The complete process of collecting, recording, and processing financial transactions of a company, from when the transactions occur, to their representation in the financial statements.