Study Questions for Chapter Three

1. Accounting basis is the ……. in which revenue and expenses are recognised in the accounts and financial statements.

2. Using ……… basis of accounting, even when cash is yet to be received for a business transaction, revenue is deemed to have been earned.

3. Using …… basis of accounting, until cash is received or expenses are paid, revenue is not recognised.

4. ……. are a collective set of principles, practices, policies, and processes that shape the foundation of financial accounting and reporting.

5. …….. are the rules that reporting entities must adhere to when measuring, recognising, and disclosing economic events.

6. ………. are a set of general assumptions applied by a reporting entity when recording transactions.

7. Materiality refers to the importance and significance of financial statements to enable all users have …….. and ….. view of the state of affairs.

8. The consistency convention is actualised as an accountant consistently applies ………. and ………. when reporting accounting or financial data from one year to another.

9. Transactions relating to the business entity are measured, recognised, and disclosed in the ………. financial statements

10. …… are always equal to the sum of liabilities and capital.