Question

State whether the following statement is true. "Accounting relies on inexact or approximate measures because many accounts in financial statements are dependent on judgment about future events and on an assessment of management intent."

Answer 1

Answer:

The answer is: False

Explanation:

There are basic accounting principles that must be followed when elaborating financial statements and the more accurate they are, the better. Accountants are considered very meticulous and exact professionals, it´s not the most entertaining career. Some of the most relevant ones are:

Accrual principle: Accounting transactions should be recorded in the periods when they actually occur, and they shouldn´t be artificially delayed or accelerated.

Consistency principle: Once you adopt an accounting method, you should continue to use it until a demonstrably better method comes along.

Reliability principle: Only those transactions that can be proven should be recorded.

Time period principle: A business should report the results of its operations over a standard period of time.

Revenue recognition principle: You should only recognize revenue when the business has completed the earnings process.

Conservatism principle: You should record expenses and liabilities as soon as possible, but to record revenues and assets only when you are sure that they will occur.

Cost principle: You should only record its assets, liabilities, and equity investments at their original purchase costs.

Economic entity principle: Transactions of a business should be kept separate from those of its owners and other businesses.

Full disclosure principle: You should include alongside the financial statements all of the information that may impact a reader's understanding.

Going concern principle: A business will remain in operation for the foreseeable future.

Matching principle: When you record revenue, you should record all related expenses at the same time.

Materiality principle: You should record a transaction in the accounting records if not doing so might have altered the decision making process of someone reading the company's financial statements.

Monetary unit principle: A business should only record transactions that can be stated in terms of a unit of currency.