UCB_UGBA102A_Topic03_Practice_Questions_Solns

UCB_UGBA102A_Topic03_Practice_Questions_Solns - Topic03...

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Topic03 Accounting System: Accrual Accounting Question 1. In a short sentence, define the following terms: a. Separate entity is an assumption that states that each business can be tracked and reported as an entity regardless of its legal structure or relationship with its owners, other interested parties or other business entities. b. Matching is a principle that states that expenses should be recorded as they are incurred to produce revenues not when cash is paid. c. Full disclosure is a principle that states that any information important enough to influenced the decisions of an informed user should be disclosed either in the financial statements or in the notes to the financial statements. d. Materiality is a constraint that states that items that are not likely to influence an informed user’s decisions need not be reported in a separate line item or footnote. e. Conservatism is a constraint that states that net assets and net income should not be overstated. UGBA102A Topic03 Practice Questions 1
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Question 2. In a short sentence, explain the difference between the following concepts: Cash-basis accounting recognizes revenues and expenses based on the transfer of cash wheras accrual accounting recognizes revenues and expenses based on the completion of the earnings process.
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This note was uploaded on 09/20/2009 for the course UGBA 102A taught by Professor Udpa during the Summer '07 term at University of California, Berkeley.

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UCB_UGBA102A_Topic03_Practice_Questions_Solns - Topic03...

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