Financial statements report only items that have significant economic
value.” This statement summarizes which basic accounting concept?
Matching.
Realization.
Materiality.
Disclosure.
Which basic accounting concept does the following statement
summarize?
“Transactions are recorded using price paid, not current prices.”
Matching.
Disclosure.
Conservatism.
Historical cost.
Which basic accounting concept prohibits firms from frequently
changing their method of valuing inventory?
Consistency.
Disclosure.
Historical cost.
Conservatism.
Which of the following does not indicate high quality of earnings?
Conservative accounting methods were used to calculate earnings.
Earnings are stable.
Earnings are from financing activities.
The firm has no extraordinary income.
Which of the following is least likely to be associated with low-quality
earnings?
Decrease in borrowings.
One-time sources of income.
Increase in intangible assets.
Slowdown in inventory turnover.
