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    1. The key principles of identification in accounting include comparability, consistency, completeness, conservatism, faithful representation, historical cost, and income recognition. 2. Under these principles, entities should disclose important details about accounting items consistently and comparably over time, use caution in recognition and measurement, and represent the economic reality of transactions. 3. Changes in accounting methods should not be used to manipulate earnings, and estimates or allocations should be systematic and rational to faithfully represent the economics of the underlying events and transactions.

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    CFAS CHAPTER 6

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    1. The key principles of identification in accounting include comparability, consistency, completeness, conservatism, faithful representation, historical cost, and income recognition. 2. Under these principles, entities should disclose important details about accounting items consistently and comparably over time, use caution in recognition and measurement, and represent the economic reality of transactions. 3. Changes in accounting methods should not be used to manipulate earnings, and estimates or allocations should be systematic and rational to faithfully represent the economics of the underlying events and transactions.

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    CFAS - Chapter 6: Identification

    Uploaded by

    agm25
    1. The key principles of identification in accounting include comparability, consistency, completeness, conservatism, faithful representation, historical cost, and income recognition. 2. Under these principles, entities should disclose important details about accounting items consistently and comparably over time, use caution in recognition and measurement, and represent the economic reality of transactions. 3. Changes in accounting methods should not be used to manipulate earnings, and estimates or allocations should be systematic and rational to faithfully represent the economics of the underlying events and transactions.

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    CFAS - Chapter 6: Identification

    Study online at quizlet.com/_75xi1u

    1. Comparability A department store changes 12. Matching An allowance for doubtful accounts is
    accounting method every year Principle established.
    in order to report a higher net
    13. Matching The entity allocates the cost of a patent
    income possible under
    Principle/Expense to the accounting periods in which it
    accounting standards.
    Recognition helps to produce the revenue.
    2. Comparability/Consistency Users have trouble making Principle
    interperiod comparisons when
    14. Materiality A large entity decides that whenever an
    an entity changes accounting
    asset has a cost of less than P10,000,
    principles from one year to the
    the cost will be charged to expense
    next.
    even though the asset may benefit
    3. Completeness/Standard The entity should always report several accounting periods.
    Adequate Disclosure the important details about
    15. Materiality The accountant of the entity keeps a
    share capital, for example, the
    detailed depreciation record on every
    number of shares authorized,
    asset no matter how small its value.
    shares issued, shares in
    treasury, subscribed shares and 16. Materiality An entity having 150 accounts payable
    par value. list each account among the liabilities in
    the statement of financial position
    4. Completeness/Standard An entity does not report the
    Adequate Disclosure major details about the 17. Prudence An entity follows a policy of recording
    shareholders' equity an item as an asset when the entity is in
    doubt whether the item is an asset or
    5. Conservatism The lower of cost and net
    expense of the current period
    realizable value is used to
    measure inventory. 18. Standard Competition has taken away much of
    Adequate the business of an airline. The airline is
    6. Conservatism Many users of financial
    Disclosure unwilling to report its plans to sell half
    statements prefer accounting
    of its fleet of aircraft.
    principles such as accelerated
    depreciation that tend to state 19. Substance over The entity estimates and records interest
    income on the "low side". form expense on a 5-year noninterest-bearing
    note payable.
    7. Faithful Representation The damaged inventory of a
    department store is being 20. Systematic and An entity charges the cost of new office
    written down. The manager Rational equipment to expense in the year of
    bases the writedown on Allocation purchase although the equipment is
    subjective opinion in order to expected to help produce revenue for
    minimize income tax. many years

    8. Historical Cost An entity records a new


    machine at the cash equivalent
    price paid.
    9. Income Recognition A construction firm signed a
    Principle three-year contract to build a
    skyway connecting Alabang
    and Tagaytay City. The firm
    immediately records the full
    contract price as revenue.
    10. Income Recognition An entity records sales after
    Principle inventory has been produced
    but before it is sold
    11. Income Recognition Subscriptions received in
    Principle advance by a magazine
    publishing entity are treated as
    deferred revenue until the
    magazines are published.

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