Question

Fair value changes are not recognized in the accounting records. b. Financial information is presented so that investors will not be misled. c. Intangible assets are amortized over periods benefited. d. Agricultural companies use fair value for purposes of valuing crops. e. Each enterprise is kept as a unit distinct from its owner or owners. f. All significant post-balance-sheet events are disclosed. g. Revenue is recorded when the product is delivered. h. All important aspects of bond indentures are presented in

Answer 1

Answer:

a. Historical Cost Principle = All the assets are recorded at their historical cost except the short term investments.

b. Full Disclosure Principle = All the details of the financial conditions of the company shall be stated properly.

c. Expense recognition principle = All expenses shall be recorded properly, and the cost of intangible assets shall be charged as expense during its useful life as amortisation expense.

d. Industry practice and fair value principle = As stated in (a) also, all short term investments shall be valued at fair value, as crops are their stock it is an industry practice in agricultural sector to record crops at fair value.

e. Economic Entity assumption = The owner of a business and that his business are two different legal persons, as income of business is computed and assessed separately and that the income of the owner is assessed separately.

f. Full Disclosure Principle = As there is a time gap in closing the actual financial year on 31 December and preparing the balance sheet, several transactions which are considered to be of important aspect for the people concerned are disclosed in the balance sheet as events after the balance sheet but before the reporting date.

g. Revenue Recognition principle = Revenue shall only be recorded when the entire risk is transferred to the buyer, and that only the payments are left to be received.

h. Full Disclosure Principle = Again all the financial statements shall disclose all the material facts as for investors interests the full disclosure principle is followed.