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Each of the Following Statements Is Justified by a Concept

Question 49

Matching

Each of the following statements is justified by a concept or convention of accounting.Write the letter that match with each statement to the concept or convention violated.

Premises:

Responses:

A company uses lower-of-cost-or-market to value inventory.

Full disclosure

This convention best enhances comparability of financial statements between years.

Conservatism

A merger agreed on just after the balance sheet date nevertheless is reported in the notes to the financial statements.

Materiality

A company forgoes hiring another full-time accountant, which would add only slightly to the financial statements' accuracy.

Cost-benefit

A large company rounds its financial statement figures to the nearest $10,000.

Consistency

Premises:

A company uses lower-of-cost-or-market to value inventory.

This convention best enhances comparability of financial statements between years.

A merger agreed on just after the balance sheet date nevertheless is reported in the notes to the financial statements.

A company forgoes hiring another full-time accountant, which would add only slightly to the financial statements' accuracy.

A large company rounds its financial statement figures to the nearest $10,000.

Responses:

Full disclosure

Conservatism

Materiality

Cost-benefit

Consistency

Correct Answer:

Premises:

Responses:

A company uses lower-of-cost-or-market to value inventory.

This convention best enhances comparability of financial statements between years.

A merger agreed on just after the balance sheet date nevertheless is reported in the notes to the financial statements.

A company forgoes hiring another full-time accountant, which would add only slightly to the financial statements' accuracy.

A large company rounds its financial statement figures to the nearest $10,000.