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1. Why is it necessary for accountants to assume that the business entity
will remain a going concern?
2. When should revenue be recognized? Are there exceptions to the
general rule?
3. What is the basic accounting equation?
4. The realization concept determines when goods sent on credit to
customers are to be included in the sales figure for the purpose of
computing the profit or loss for the accounting period. Which of the
following tends to be used in practice to determine when to include a
transaction in the sales figure for the period. When the goods have been:

a. dispatched
b. invoiced
c. delivered
d. paid for

5. Complete the following work sheet:

i. If a firm believes that some of its debtors may ‘default’, it should act on
this by making sure that all possible losses are recorded in the books.
This is an example of the -------------- concept.
ii. The fact that a business is separate and distinguishable from its owner is
best exemplified by the ----------------- concept.
iii. Everything a firm owns, it also owns out to somebody. This co-incidence
is explained by the ------------------------ concept.
iv. The ------------------ concept states that if straight line method of
depreciation is used in one year, then it should also be used in the next
year.
v. A firm may hold stock which is heavily in demand. Consequently, the
market value of this stock may be increased. Normal accounting
procedure is to ignore this because of the -----------------
vi. If a firm receives an order for goods, it would not be included in the sales
figure owing to the ----------------------------------------
vii. The management of a firm is remarkably incompetent, but the firms
accountants can not take this into account while preparing book of
accounts because of ----------------------------------- concept.

Long Answers

1.‘The accounting concepts and accounting standards are generally
referred to as the
essence of financial accounting’. Comment.

2.Why is it important to adopt a consistent basis for the preparation of
financial
statements? Explain.
3. Discuss the concept-based on the premise ‘do not anticipate profits but
provide for
all losses’.
The principle ‘do not anticipate profits but provide for all losses’ is in
accordance with the conservatism (also called prudence) concept.