List – I List – II a. Principle of Separate Entity i. Valuing Plant and Machinery at cost less depreciation. b. Principle of Conservatism ii. Recording punctuality and honesty of employees of an organization. c. Principle of Money Measurement iii. Capital contributed by proprietor is shown as liability in Balance Sheet. d. Historical cost concept iv. Valuing inventories at cost or market price whichever is less.
Matching Accounting Principles: List I & II
This section provides a step-by-step matching of accounting principles from List I with their descriptions in List II, concluding with the correct option code.
a. Separate Entity Principle Matching
The Principle of Separate Entity requires that a business is treated as distinct from its owners. Therefore, capital contributed by the proprietor is shown as a liability in the Balance Sheet. This matches with item (iii).
b. Conservatism Principle Matching
The Principle of Conservatism (or Prudence) guides accountants to anticipate potential losses but not potential profits. Valuing inventories at the lower of cost or market price is a direct application of this principle, as it accounts for a potential decrease in value. This matches with item (iv).
c. Money Measurement Principle Matching
The Principle of Money Measurement restricts accounting records to transactions and events that can be expressed in monetary terms. Item (ii), recording punctuality and honesty of employees, refers to qualitative aspects not typically recorded under this principle. However, based on the provided options, this is the designated match.
d. Historical Cost Concept Matching
The Historical Cost Concept states that assets should be recorded at their original cost at the time of acquisition. Item (i), valuing Plant and Machinery at cost less depreciation, starts with the initial recording at historical cost. This matches with item (i).
Correct Code Identification
Summarizing the matches:
- a - iii
- b - iv
- c - ii
- d - i
The correct code representing this matching is a - iii, b - iv, c - ii, d - i.
Important Questions from Basic accounting principles
The traditional accounting practice of resolving uncertainty by choosing the solution that leads to the lower amount of income being recognized in the current accounting period is based on which of the following accounting principles?
The policy ‘anticipate no profit and provide for all possible losses’ arises due to
“Advance received from a supplier is not taken as income or sales.” This comment is based on
Revenue from sale of goods ordinarily is reported as a part of the earning in the period
The generally acceptable accounting principles (GAAP) fulfill the conditions of
(i) Relevance
(ii) Objectivity
(iii) Feasibility
